For small-business owners, late payments aren’t just emotionally draining – they can be financially ruinous. Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson states that late and unpaid invoices are among the biggest challenges SMEs face today. His office exists to advocate for small businesses and provide resources to help them navigate issues like payment disputes.

“The main [reason] is largely just how challenging the business environment is, and that there’s margin squeeze happening across the small-business economy,” Bruce says.

“More than two-in-five cases we help with now involve a payment dispute. [Before Covid-19], we’re talking about less than one-in-four. It’s been a substantial uptick.”

“I feel like it’s almost a rite of passage to have had a non-payer,” says Jasmine Parasram, a sole trader of 15 years who owns two small businesses: Jasmine Designs and Creative Business Kitchen. Jasmine has dealt with so many of these situations over the years that she now helps other business owners navigate them under the moniker of “the Pricing Queen”. 

“The average freelancer has $20K worth of unpaid invoices in their inbox,” Jasmine explains. “But it gets less and less common the more you learn the lessons.”

If you’re facing payment problems, you’re not alone – and this article is for you. It will explore, in simple terms, what your options are when chasing up elusive payments. We’ll go over why payment disputes happen, how to prevent them from happening, and what to do if you end up in a situation where someone isn’t accepting the bill.

Why payment issues happen

As Jasmine explains, it’s common for business owners to blame themselves for payment mishaps. 

“The guilt and the shame that comes from it is massive,” she explains. “The freelancers often blame themselves, because there are things that they could have done, like withholding deliverables until the whole amount is paid, or being brave enough to speak up and call out bad behaviour.”

But non-payment isn’t a ‘you’ problem. You’ll be unsurprised to find out that the most common cause is financial difficulty, the ASBFEO states. It’s not just the high cost of living, either. With the ATO now cracking down on small-business debt, many are prioritising these repayments over paying larger businesses. In other words, if someone isn’t paying you, it’s most likely because they simply can’t afford to do it.

With that in mind, it’s important to be careful about how we view payment disputes, Jasmine says.

“Everyone seems to take payments personally,” she says. “It’s not a personal vendetta. It’s not against you, it’s not an emotional thing.”

How do you prevent payment problems?

Nobody wants to have to chase up payments, so how do you prevent payment pickles in the first place?

It starts with avoiding clients who are likely to cause issues, both of our contributors argue. If your potential client is another business, Bruce says that you may want to check with a credit reference bureau, such as CreditorWatch, to understand their current financial situation. If the business has a few outstanding debts, especially to the ATO, engaging with them is probably a bad idea.

When it comes to the sort of problems you’ll run into with large businesses, Bruce explains that changing payment terms are usually the issue.

“The larger [companies] tend to just change the payment terms unilaterally, and a small business supplier’s sort of stuck with it, particularly where they’re so dependent on that relationship,” he says.

The government has introduced a payment times reporting register to help keep large businesses accountable. Unfortunately, Bruce says, this is often complicated to use, so it’s not easy to get quick information as an SME supplier about who is honouring payments and who is not.

In Jasmine’s experience, one of the biggest mistakes you can make is not following your gut feeling when meeting potential new clients.

“Some clients, you can tell they’re going to be shitty payers,” she says. 

You also might need to be wary of more than just payment times. Even if a client has the funds to pay on time, you can lose your valuable time to nitpickers, hagglers and those who don’t appreciate your value.

“I’ve turned clients away at the beginning,” Jasmine says. “It hasn’t necessarily been because I think they’re going to be bad payers. It’s the ones who control the creative process, the ones you haggle over the price, the ones that suggest you take shortcuts.”

To make the process of deciding whether to take on a client easier, Jasmine created a quick-reference “client contemplation” flowchart for her Creative Business Kitchen community:

Preventing payment issues after you’ve taken on a client

Aside from simply not getting involved with the wrong people, there are some other steps you can take to prevent a mishap from occurring after you’ve taken on a new client.

The first, and most obvious, is to have a watertight contract ready. An excellent contract will “show the battle scars” that an experienced small-business owner has obtained over the years, Jasmine explains. 

Crucially, it should involve a process for collecting payments in case of difficulties, both Jasmine and Bruce say. For instance, you might add a percentage to the bill for every week of non-payment, to cover the time spent chasing after the money. You may want to cap this interest up to a certain sum, but it’s a good way to cover yourself in case of a payment pickle.

If anything goes awry, you can refer back to your contract. It takes some time and emotion out of advocating for yourself, because, as Jasmine points out, the client has already agreed to respect your time and money.

“[The client] agreed that if they don’t pay extra, the next steps in the process are the responsibility of both you and them to navigate,” Jasmine points out.

Another way to protect yourself: Always delay key deliverables until you actually get paid.

“More often than not, people are in a position where they feel uncomfortable about charging, especially as a freelancer, so they avoid it by starting to do the work because they’re so excited, or delivering everything before they get paid,” Jasmine explains. 

Finally, consider setting up a direct-debit system when collecting payments. That way, money comes straight out of your client’s account when it’s payment time.

“I personally use GoCardless, where it just automatically charges them and then gets that payment from them,” Jasmine says.

What to do if someone isn’t paying

Let’s say you did your due diligence on a client, your gut feeling was good, but now there’s a payment problem. It happens. What do you do?

“The advice that we provide is to make sure the party that owes you the money is aware that you are owed the money,” Bruce says. “Just: ‘How are you going? Just a quick call, I noticed that payment that was due today hasn’t come in. Have you got all the information you need? Is the invoice what you expected?’

The ASBFEO has found a rise in cyber scams involving invoice substitution, where a criminal changes your bank details on an invoice to redirect payment elsewhere. This can be something to watch for – or a pretext to check in with your client while showing helpfulness and concern, Ombudsman Bruce points out.

“Even confirming that [the invoice] has landed with the right people and that your account details are accurate – that’s a good early call,” he says.

If you’re uncomfortable about going after what you’re owed, you’re most definitely not alone. Being uncomfortable asking for money is a common problem among business owners, Jasmine says. 

“They feel very uncomfortable about it when they put it as ‘asking for money’. I put it as ‘letting people know the bill’,” she says. “You wouldn’t expect to eat an entire meal at a restaurant and walk out the door without paying. So the same thing is true when you are running a business.”

When you are ‘collecting the bill’, it’s always useful to make the process less personal; Bruce and Jasmine suggest setting up automations around payment, like invoicing services that send the bill to your client’s inbox automatically.

“Remove the emotion,” Jasmine advises. “They’re not emotional about the money, neither should you be.”

What if a client says they can’t pay you?

If someone can’t pay you, a good first step is to ask for a portion of the money – or put them on a formal payment plan.

“You might say, ‘Look, can I get some of it in the bank? Because I’ve got my bills to pay as well. And if you’re in a tight spot now, is there some portion of it you can pay now?’ ” Bruce says. “And then you can talk about a payment plan or something like that.”

This step is about levelling with the person and keeping everyone’s dignity intact. The Ombudsman points out that you don’t want to burn any important business relationships unless you really have to do that.

“If you get to the point where you think nothing’s changing and you’re doubting whether there’s a genuine interest, it may be time to issue a letter of demand – a more formal notification that you’re owed money,” he adds. “And we provide some resources to help people do that, because often it’s the first time they’ve had to chase up and they’re not quite sure what their moves are.”

Business.gov has a useful resource page for writing a letter of demand, including a template you can base yours off.

If a letter of demand doesn’t work, you might want to bring in a third-party resolution service. The ASBFEO website also has a resource for finding the right service for you – see https://asbfeo.gov.au/disputes-assistance/dispute-support. The online tool asks you a number of questions about your issue, location and business, to point you towards the body that can best help you. It also provides a range of ways you can contact each body.

You do have legal and consumer law obligations when contacting other businesses about debt; read the debt collection information on the Australian Competition & Consumer Commission (ACCC) website.

You can also contact a debt-collection agency to help you recover expenses; it may be best to inform your customer that you plan to use one. If you’re going down this road, the ACCC has put together some debt collection guidelines for collectors and creditors.

If the dispute is heating up, but you don’t wish to go to court, you may consider alternative dispute resolution, such as mediation. ADR’s benefits include lower costs, quicker timeframes, confidentiality, and a more flexible and collaborative dispute resolution process. Once again, the ASBFEO has a resource for finding an ADR practitioner in your state who can help you, or you can search the Mediator Standards Board website to find a nationally accredited mediator.

You can also lodge a complaint through your state or territory’s Fair Trading agency, which can act as an informal negotiator.

Taking the matter to court should be your last option, the ASBFEO warns. While some small-business owners manage to resolve issues in a small claims court, the process is usually expensive and time consuming. 

Further resources

• The ASBFEO offers a range of dispute support services.
• Business.gov.au offers a range of resources and guides on payment issues. See: ‘What to do when you haven’t been paid’ and ‘Resolve disputes’ pages.
• See the ACCC’s debt collection guidelines if you’re thinking of using a debt-collection agency.
• If you need mental health support, NASBO (NewAccess for Small Business Owners) is a guided self-help mental health program that aims to support you in overcoming a particular program, such as a payment dispute.
• Call the free small business debt helpline on 1800 413 828 if you’re in financial difficulty.
• The Small Business Mentoring Service provides low-cost mentoring in all areas of running a business.

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CreditorWatch data revealed that the rate of B2B payments that are 60+ days in arrears is up 21.4 per cent year-on-year and 7.9 per cent since January. This is considered an indicator of a combination of more challenging business conditions, such as higher interest rates, and higher costs of living/doing business.

Data also suggests that the proportion of payments in arrears remains below that experienced in the pre-COVID period, which was a relatively soft period for economic growth in the Australian economy in the aftermath of the Banking Royal Commission when the banks tightened lending standards. However, the report pointed out that it is not an indicator of a weak economy.

There has also been a decrease in discretionary spending and activity and demand, especially in interest-rate sensitive sectors, especially for the Construction and Food and Beverage Services sectors. Data suggests that this is an indicator of a softer economy at the present time, but not an especially weak economy overall.

The information, media and telecommunications sector has the highest rate of late payment among all industries, recording a rate of 5.9 per cent, followed by Electricity, Gas, Water and Waste Services (5.7 per cent) and Financial and Insurance Services (5.2 per cent). Meanwhile, the construction and hospitality sectors currently have the highest rates of payment defaults, at 1.77 per cent and 1.67 per cent respectively.

The research also noted that businesses with a high degree of government support or funding continue to experience lower rates of default, as do many services that include financial and insurance services. However, the forthcoming caps on foreign students could produce less favourable conditions for Education and Training providers. And while the rural sector has been doing well after three favourable seasons in a row, they may face increased pressures as commodities such as beef are expected to hit lower prices.

CreditorWatch CEO Patrick Coghlan commented that the deteriorating B2B payment times and the upward trend in payment defaults indicate that many businesses are still under considerable cashflow pressure.

“Ongoing economic impacts such as weaker consumer demand are clearly bringing more pressure to bear on Australian businesses,” he said. “The fact that the construction and hospitality sectors have the highest rates of payment defaults and construction has the highest rates of arrears, mirrors the latest ABS data showing declining building approvals and flat spending in cafes and restaurants across much of 2024.”

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CreditorWatch’s August Business Risk Index found that as many as 92 per cent of businesses in Construction and 87 per cent in both Distribution and Business Services reported overdue invoices in the past 12 months and has affected businesses of all sizes, particularly 96 per cent of large businesses and 74 per cent of small businesses experiencing late or overdue payments.

The Distribution sector has been the most affected, with eight per cent of businesses in the sector reporting that more than half of their invoices were overdue, compared to six per cent in Construction. Distribution was also the worst category for payments 30-plus days overdue, with 51 per cent of payments overdue by 30-plus days and 18 per cent by 60-plus days.

Connection to business failures

The report also noted that the failure rate for Australian businesses currently sits at an average of 4.95 per cent, having increased by 17.3 per cent since January. Business payment defaults have also surged by 68.1 per cent over the past year, reaching record levels.

CreditorWatch also pointed out in its report a strong correlation between B2B payment defaults and business failures. It noted that a business with one payment default has a 28 per cent chance of closing in the next 12 months, increasing to 74 per cent for businesses with four or more defaults.

The amount of time a late payment is overdue was consistent across business sizes until the 60-plus days overdue category. But while 11 per cent of small businesses reported such delays, just one per cent of medium businesses and six per cent of large businesses submitted such reports, indicating how larger businesses have more capacity to chase late payments and possess greater bargaining power during contract negotiations.

How are small businesses coping with late payments?

CreditorWatch’s Business Sentiment Survey also assessed the strategies businesses are adopting to combat late payments. The most common approaches include ‘avoiding dealing with client/customers with a history of late or overdue payments’ (39 per cent), ‘requiring at least some payment in advance of delivery’ (35 per cent), and ‘imposing a penalty for late or overdue payments’ (28 per cent).

Smaller businesses (25 per cent) and medium-sized businesses (30 per cent) noted having shorter payment terms as another key strategy, while larger businesses said they were introducing technology to get paid more quickly (38 per cent).

Small businesses are hesitant to chase up payments

The biggest challenges businesses face when chasing late payments include ‘not wanting to upset clients/customers’ (35 per cent), ‘concerns that clients/customers will do less business or no longer want to do business’ (34 per cent), and ‘not wanting to be seen as rude’ (26 per cent).

CreditorWatch’s CEO, Patrick Coghlan, said that the surge in late payments is creating significant strain across sectors, with many businesses struggling to maintain consistent cash flow as overdue invoices pile up.

“Late payments are more than an inconvenience, they’ve become a critical issue for businesses, affecting cash flow and operational stability, and even their long-term survival,”  Coghlan said. “This is placing enormous pressure on companies, particularly small and medium-sized enterprises, which often lack the financial buffers, negotiating power and collections capabilities that larger corporations have.”

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Unfortunately, the already high number could go as high as the mid-40s by December – a level not seen in the last decade.

“This slowdown in payments is having a knock-on effect down the whole supply chain across just about all industries,” explained OptiPay CEO Angus Sedgwick. “It’s a sign businesses are under mounting financial strain and are starting to become selective about the timing of when they pay invoices.”

OptiPay also noted that it is continuing to see an increase in invoice financing enquiries from SMEs who need access to working capital.

“With the ATO coming down hard on tax debts, many businesses which have previously weathered the past couple of years are suddenly realising their cash flow options are now limited,” said Sedgwick. “With higher interest rates, banks are tightening their lending, so unfortunately pain is on the way for many SMEs who are struggling with cash flow as invoices are not paid on time.”

More than 11,000 Australian companies entered external administration for the first time in 2023-2024 according to ASIC, a 39 per cent jump compared to the year before, with construction and accommodation/food services being the industries worst affected.

“SMEs are finding it tough now but unfortunately we expect it will be even harder for them if they are unable to put safeguards in place like invoice financing,” Sedgwick concluded.

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The move has been lauded by various parties.

“This funding is very important for SMEs and provides the ability to adopt eInvoicing that would enable better cashflow management and ensure timely payments,” said Robin Sands, CEO of Link4, a leading eInvoicing solutions provider.”

Currently, while government agencies are already paying eInvoices within just five days, thus dramatically improving cashflow for countless businesses, this is not yet the case for B2B transactions.

Sands pointed out that eInvoicing can significantly reduce payment delays. “Digitising the invoicing process streamlines payments, providing clear, accessible records of transactions,” he said. “If an invoice comes into the accounting system in an efficient way, it is easier for it to be paid faster.”

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) previously reported that one in four large businesses takes over 120 days to pay small business customers, with only 30 per cent paying within 30 days. As such, small businesses are experiencing late payment rates three times higher than larger corporations.

In response, the Federal Government implemented the ‘Payment Times Reporting Scheme’, which sought to address the late payments issue by mandating large businesses to report their payment times to small businesses and improve payment performance. 

“For SMEs, overdue invoices are more than just a hassle; they severely hinder growth,” Sands said. “Cashflow is the lifeblood of any business. Disruptions can stifle expansion and day-to-day operations.”

Sands pointed out that delayed payments impact not just individual businesses but the broader Australian economy. “When SMEs face payment delays, their ability to invest, hire, and grow is constrained. This stifles innovation and job creation,” he explained.

Sands further remarked that large businesses may see delayed payments as a financial safeguard, but this overlooks the broader impact. “Lengthy payment cycles can harm reputations and lead to higher future costs as suppliers raise prices to cover risks. Ultimately, this cost-saving measure can become more expensive over time,” Sands added.

“The problem of delayed payments is complex, but eInvoicing offers a clear solution. By embracing eInvoicing, businesses can improve efficiency, transparency, and standardisation, leading to faster payment cycles and healthier cash flow. For SMEs, this can mean the difference between stagnation and growth,” Sands concluded.

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Cybercrime was top of the concerns for Australian businesses, with 72 per cent having expressing fears about business fraud and 43 per cent stating it was their biggest concern. However, despite these worries, only 36 per cent reported using two-factor authentication as a security measure.

Meanwhile in New Zealand, the biggest concern for small businesses was late payments, with one in two businesses reporting it as a major challenge. Aussie SMEs weren’t far behind, with one in three people saying it is a significant issue.

Economic instability is also a major pain point for SMEs in both countries, with 76 per cent in Australia and 75 per cent in New Zealand reporting that business has been impacted by inflation or rising costs, with customer spending decreasing by over 60 per cent in both countries. Other reasons included high borrowing costs and an inability to expand.

CEO of Pin Payments Chris Dahl said that it is clear to see the real impacts interest rate rises, inflation and increased costs of living is having on small businesses across both countries.

“This has been a growing area of concern for small businesses for years,” Dahl said. “Post-pandemic businesses haven’t had a break, with rising costs crippling opportunities for growth and leading to missed opportunities that impact revenue and, ultimately, business survival.

“In the last 12 months, the Australian Consumer Price Index (CPI) rose by 7.8 per cent, its highest since 1990,” Dahl added. “Coupled with the difficulties businesses are already facing, that’s concerning for the survival of small businesses which underpin our nation.”

In New Zealand, 50 per cent of businesses admitted that they had no plans to grow or expand. This was in stark contrast to Australia, with about half of the businesses there having plans to scale.

“It’s clear to see from these survey results, that New Zealand small businesses have been hit harder than Australia by recent global economic instability,” Dahl said. “Yet, New Zealand is a nation made up of small businesses, with over 5 million SMBs, making their survival vital to the country’s vibrant culture and GDP.”

Recruitment sentiments between the two countries were another indicator of the disproportionate impacts of inflation, with Australian businesses being 27 per cent more likely to hire in 2024 than New Zealand.

“There’s a lot of uncertainty for small businesses in both countries right now which leads to a halt in innovation and growth. Our nations share a union and often work side by side, with an overlap in businesses and staff. Therefore, the survival and support of the start-up and [small-business] ecosystems in both countries is vital,” Dahl concluded.

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The Pursuing Payments report found that 55 per cent of SME leaders are worried that the number of late-paying customers will increase in the next 12 months, a major concern given that 50 per cent of respondents admitted they avoid awkward money conversations. And 19 per cent of respondents have estimated that their business loses between $6000 and $30,000 from late payments annually.

Additionally, 86 per cent of SME leaders who have avoided money conversations with customers in the past 12 months say there has been some impact from avoiding such conversations. Millennials are more than twice as likely as Baby Boomers to agree that they’d feel uncomfortable asking customers for payment (42 per cent for millennials compared to 20 per cent for Baby Boomers).

When it comes to feeling ‘awkward’ about money, 62 per cent of millennial business leaders have said that they’d feel uncomfortable chasing customers for late payments, compared to 40 per cent of Gen X and 36 per cent of Baby Boomers.

Half of all millennial business leaders also agree they now find it harder to talk about money with customers than before the rise in the cost of living. 70 per cent of millennials are also concerned that their problem of late-paying customers might worsen this year as the cost of living rises.

However, most Millennials and Gen X (85 per cent and 68 per cent, respectively) are more likely than Baby Boomers (51 per cent) to be interested in introducing technology such as automated invoicing or payment platforms to get paid more quickly.

The data also noted a gender gap in payment confidence, with 29 per cent of women agreeing they’d feel uncomfortable asking customers for payment, rising to 46 per cent when it comes to chasing late payments. However, only 26 per cent of men feel uncomfortable asking for payments and 40 per cent share this experience chasing payments.

“Despite some optimism emerging late payments will continue to cause a cashflow crunch for already struggling SMEs in 2024 – businesses need to acknowledge this and adapt quickly to stay on top,” Luke Fossett, General Manager, at GoCardless, said.

“For those wishing to avoid more uncomfortable money conversations, there are practical solutions, such as avoiding payment options with high failure rates, automating follow-ups on unpaid invoices and offering payment methods that reduce the onus on your customers such as Direct Debit or PayTo, which automatically pull money from a customer’s bank account,” Fossett added. “For recurring payments, all they need to do is set up the payment once and then forget about it.”

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Alongside customers not paying on time, inflation and the rising costs of living, a lack of knowledge about how to best optimise their working capital strategy were among the reported stressors for small-business owners. This is despite 79 per cent stating that managing their businesses’ working capital cycle is an important part of running their business. Cashflow challenges in particular have forced 17 per cent of owners to consider ceasing operations.

“Running a small business can be incredibly rewarding, but the day-to-day stress of paying suppliers and staff, and finding new opportunities to grow, can take a huge toll on mental health, especially when the unexpected happens,” Emily Roberts, Vice President and General Manager of Commercial Sales and Account Development at American Express, said.

“There are things however that owners can do to help alleviate the stress of running a business,” Roberts added. “Getting cashflow in check is one of these. Optimising cashflow puts business owners in a better position to navigate unforeseen circumstances, reinvest in their business, their people, and just as importantly, themselves. Tools such as business charge cards help to increase funds that are available for day-to-day operations and provide extra breathing space to repay.”

Alexi Boyd, CEO of the Council of Small Business Organisations Australia (COSBOA) pointed out that small-business owners are some of the most resilient people in Australia, but that economic headwinds have created an environment where they are exhausted, mentally and financially.

“One of the most underutilised and least understood aspects of running a resilient business is managing working capital,” Boyd said. “This latest research makes one thing clear: small-business owners are acutely aware of the challenges they face and are calling out for support to take back control of their business today and into the future. There is such an important role for the wider business community and government to play in providing small businesses with the tools they need to excel.”

Despite the significant mental health toll that working capital – or a lack thereof – is having on Australian small-business owners, 72 per cent remain optimistic about their business’s future.

“It’s important to understand the nuances of small business and the way this affects our mental health at work,” Leanne Faulkner, Founder of Fortitude at Work and small-business mental-health advocate, said, “We live and breathe our businesses and don’t shut off from everything. We know lots about creating a healthy workplace in large organisations, but it’s a mistake to think small business is simply a smaller version of a big company.

“How small-business owners work, how we make decisions and how we thrive is different,” Faulkner added. “Through these findings, small-business owners say we do not work in a bubble, we rely on others in our business ecosystem to help support our ability to work well every day. Any support from big businesses to help empower our daily operations and potentially relieve some working capital stress is welcome, so we can be at our best and focus on growth.

“There is now more community support available for the small-business sector and I’d encourage all small-business owners to reach out and talk to someone if they’re feeling overwhelmed, regardless of the situation,” Faulkner concluded.

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The Xero Small Business Insights special report Crunch: Cash flow challenges facing small businesses, Part II also found that 48 per cent of invoices issued by Aussie small businesses in 2021 were paid late, with 10 per cent paid more than a month after they were due.

The report notes that those that received the majority (60-80 per cent) of their payments late experienced 17 per cent more cashflow crunches compared with small businesses that were generally paid on time. This is seen as critical as small businesses face sharp increases in rental costs and payroll expenses, which rose nine per cent year-on-year (y/y) and 13 per cent y/y respectively in the last quarter of 2021.

“Late payments create a flow-on effect for small businesses, creating unnecessary accounting complications and threatening ownersʼ ability to meet their own obligations – such as rent or wages – in time,” Rachael Powell, Chief Customer Officer at Xero, said. “While increases in expense costs and seasonal fluctuations in demand are often beyond our control, small businesses and national economies alike can send a clear message that late payments aren’t acceptable, and come together to develop policies and penalties for those who refuse to take the hint.

Joseph Lyons, Managing Director for APAC at Xero pointed out that Aussie small businesses are facing rising expenses amid a sharp uptick in rent, energy, fuel and payroll costs that started last year.

“These pressures are unlikely to subside anytime soon, making cashflow stress one of the big issues for small businesses in the coming months,” Lyons said. “In this climate, it’s more important than ever that we take serious action in cracking down on avoidable late payments and equipping small businesses to build cash reserves for those leaner months.”

The report noted that reducing late payments to affect less than 20 per cent of invoices could reduce negative cashflow months by up to 17 per cent for some businesses. Other recommendations include the adoption of online invoice payment options for faster payment, and businesses working with their accountant or bookkeeper to stay on top of government programs that offer payment plans for relief from rising costs of small business.

“If small businesses and their accounting partners and governments can actively look out for these red flags in their financial data, they’ll find it easier to work together on ways to anticipate cashflow crunches and avoid them with better planning and more timely action,” Powell said.

The new report follows Crunch: Cash flow challenges facing small businesses, Part I, which was released in July.

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Below are some ways to make your finances work harder for you in 2022.

Re-consider – and communicate – your pricing model

If you don’t follow a proven formula when determining pricing, now is the time to do so, to achieve sustainable business growth. Your pricing should account for fixed costs, which remain the same regardless of your sales, and variable costs, which change depending on the quantities you sell.

It is recommended that businesses increase their prices annually, in line with inflation rates. Communicating any price increases well in advance of the date they come into effect is essential here. When sharing this information, focus on how they will benefit from the increase, such as receiving a consistently high-quality product.

Overcome late payments and take control of cashflow

Improve your cashflow by looking to technology such as GoCardless to set direct debits up with clients on retainer. It eliminates the need for frequent invoicing and chasing up on payments, as amounts are automatically deducted from their account.

Likewise, integrating your accounting software with platforms such as PayPal and Stripe will speed up payment times due to the payment process being more convenient than a bank transfer, as will offering incentives for early payments, and fees for late ones.

Assess and reassess your overheads

Open up your forecast and look back at costs that were incurred throughout the year, to identify where they could be reduced. Bank fees and subscriptions, for example, can easily add up in a small business, yet also tend to be forgotten as the initial investment seems quite low.

Consult with your bank about their fees, and consider seeking out those which offer zero fees, unlimited transactions, and no minimum balance. On the subscription front, ask yourself if you really need them all, and if so, make a note to discuss how they could be claimed with your accountant at tax time.

Master your small-business marketing

You don’t need to invest thousands to get a return on marketing. User-generated content can be very powerful, so consider creating a Google My Business account and offering an incentive to customers who leave you a review. This will also enhance your business’s ranking in Google search.

Connecting with your local community and offering specials or discounts at certain times of the week or year, can increase business during quieter times while driving repeat custom, and there’s immense value in collaborating with like-minded businesses. You don’t need to outlay major costs here, in return for an invaluable increase in brand awareness.

Turn to user-friendly tech

The future is tech-based, so if you’re still performing finance-related tasks manually, I urge you to invest in accounting software. It’s what most clients expect now, and it’ll save you immense time and money, by eliminating the need to do things like manually create and chase invoices.

If you’re in industries like hospitality or retail, rostering software like Deputy allows you to better manage your staffing, meanwhile, project management systems such as ClickUp can help keep service-based businesses and teams accountable.

A new year signals a fresh start – a time to say sayonara to any bad business habits as they relate to your finances. Take these five tips on board, and you’ll be well on your way to enjoying a prosperous 2022!

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