One in ten Australian small and medium businesses has considered closing permanently because their customers do not pay on time.
That figure comes from the GoCardless Pursuing Payments 2025 report, which surveyed 500 Australian business owners and decision-makers through YouGov in August 2025. It is not a hypothetical scenario drawn from economic modelling. It is business owners answering a direct question about whether late payments have pushed them to the point of considering shutting down entirely.
The same report found that 63 per cent of Australian businesses are losing money to late payments, 17 per cent are losing more than $2,500 per month, and nearly half are waiting longer for payment than they were 12 months ago. At $2,500 per month, the annual cost reaches $30,000. For a business turning over $500,000, that is 6 per cent of total revenue disappearing into the gap between issuing an invoice and receiving the funds.
And the problem is getting worse, not better.
The GoCardless data paints a comprehensive picture of a late payment culture that has become deeply embedded in Australian business.
The proportion of SMEs losing more than $2,500 per month to late payments rose from 11 per cent in 2024 to 17 per cent in 2025. That is a 55 per cent increase in a single year. Some businesses reported estimated losses exceeding $10,000 per month.
Nearly half (48 per cent) of Australian businesses said they are waiting longer for payments than they were 12 months ago. This is not a static problem with a consistent impact. It is an accelerating one.
The Payment Times Reporting Regulator provides additional context from the other side of the transaction. The average time for an SME supplier to receive payment from a large business customer is 35.4 days. In manufacturing, the average stretches to 43 days. The federal government has stated it wants to see average payment times well below 30 days, and draft legislation has been proposed with civil penalties for businesses that do not comply. A statutory review of the current system found it needs "fundamental reform."
SmartCompany's reporting on the data adds further detail. Some 27 per cent of businesses reported losing up to $6,000 per year, while 11 per cent reported losses between $12,001 and $30,000 annually.
Beyond the direct financial impact, late payments create a significant administrative burden that pulls business owners and their staff away from productive work.
One in five companies reported devoting between six and 12 working days per year to chasing overdue payments. That is roughly one to two and a half working weeks spent on an activity that generates no revenue, builds no capability, and serves no customer.
A further 58 per cent of Australian SMBs spend at least an hour each week on collections-related activities, while 26 per cent spend an hour or more every week specifically chasing payments.
For a business owner billing out at $200 per hour, an hour per week on collections represents over $10,000 in lost productive time annually. For a small team where multiple people are involved in invoicing and follow-up, the total cost in time and distraction is significantly higher.
The behavioural responses to persistent late payments are where the data becomes most concerning, because they reveal how the problem compounds and spreads through the economy.
The most striking finding is that 68 per cent of all respondents now agree that late payments are simply an "inevitable cost" of doing business. This represents a fundamental shift in mindset. Rather than treating late payment as an exception to be managed, the majority of businesses have accepted it as a permanent feature of their operating environment.
The downstream responses to this acceptance are reshaping how businesses operate.
Some 26 per cent of Australian businesses have considered increasing their prices to offset the cost of payment delays. This means late payment is not just costing individual businesses. It is contributing to price increases across the economy, as businesses attempt to build the cost of carrying unpaid invoices into their pricing structures.
Around 34 per cent have considered refusing future work from chronic late payers. In practice, this means businesses are screening potential clients based on payment behaviour, which constrains their addressable market and limits growth opportunities.
Perhaps most concerning, 23 per cent have considered paying their own suppliers late. This is the contagion effect. When a business cannot collect from its customers on time, it begins delaying payments to its own suppliers, pushing the cash flow problem further down the supply chain. One slow payer can create a cascade of late payments affecting multiple businesses.
The GoCardless report asked businesses what they would do differently if their customers paid on time. The answers reveal the real economic cost of late payment culture.
If paid on time, 24 per cent of Australian businesses would invest in expanding their operations. A further 17 per cent would directly hire more people.
These are not aspirational responses about what businesses might do in an ideal world. They are answers to a direct question about decisions being deferred specifically because of cash flow pressure caused by late payments.
In an environment where the Australian Industry Group reports that wages are the top inhibitor of business performance (cited by 34 per cent of leaders), and where the MYOB Bi-Annual Business Monitor shows 21 per cent of SMEs identifying cash flow as a leading concern with 18 per cent specifically naming late payments, the connection between payment behaviour and economic growth is direct.
Businesses that cannot collect their revenue on time cannot invest, cannot hire, and in some cases cannot survive. The 10 per cent closure consideration rate is the extreme expression of a problem that affects the growth trajectory of a much larger group.
The Reserve Bank of Australia's Small Business Finance Bulletin from October 2025 provides a view of how SMEs are financing the gap between invoicing and collection.
Non-bank lending to SMEs has increased strongly since 2022. Broker-originated business loans are rising, indicating that SMEs are increasingly using intermediaries to access credit rather than going directly to their bank. Business loan quality remains sound overall, but non-performing loans have ticked up slightly in hospitality, retail, and construction, which are the sectors most exposed to consumer spending fluctuations and payment delays.
The implication is straightforward. When customers do not pay on time, businesses borrow to cover the shortfall. Non-bank lending is typically more expensive than bank lending. So the cost of late payments is not just the direct financial loss and the time spent chasing invoices. It includes the interest cost of bridging finance taken out because revenue that should already be in the account has not arrived.
For a business borrowing $30,000 on a business overdraft or line of credit at 8 to 12 per cent, the annual interest cost of that bridging is $2,400 to $3,600. That cost sits on top of the $30,000 in delayed payments themselves.
The federal government has acknowledged the problem and is moving toward stronger enforcement. The Payment Times Reporting Regulator currently requires large businesses to report their payment practices, but the statutory review found the system lacks teeth.
Draft legislation proposed in late 2025 would create a clearer pathway to civil penalties for businesses that do not meet payment time obligations. The government's stated target is average payment times well below 30 days.
Whether this regulation will meaningfully change behaviour remains to be seen. Payment times reporting creates transparency, but transparency alone does not guarantee compliance. Large businesses with dominant market positions and complex accounts payable processes have limited incentive to accelerate payments unless the penalties are significant enough to alter their cost-benefit calculation.
For SMEs, the regulatory response is worth monitoring but should not be relied upon as a solution. The practical response needs to happen at the individual business level.
The data suggests several practical responses that sit within the control of individual businesses.
Invoicing speed and process matter. The gap between delivering a service and issuing an invoice is dead time in the cash conversion cycle. Businesses that invoice on delivery or same-day consistently collect faster than those with weekly or monthly billing cycles. Automating invoice generation through accounting platforms like Xero reduces this lag to near-zero.
Payment terms should be explicit and enforced. Setting clear terms at the point of engagement, including late payment penalties, and following through with structured follow-up processes changes the dynamic from hopeful expectation to contractual obligation.
Receivables ageing visibility is essential. Knowing at any given moment which invoices are current, which are 30 days overdue, which are 60 days overdue, and which are at risk is the foundation of effective cash collection. This is one of the core deliverables of any competent finance function, whether internal or embedded through a provider like Scale Suite.
Cash flow forecasting that incorporates actual collection patterns, not just invoiced revenue, gives business owners the ability to anticipate shortfalls and arrange financing before they become urgent. The businesses that manage cash flow most effectively are those that plan for late payments rather than reacting to them.
Client payment behaviour should inform business decisions. The 34 per cent of businesses considering refusing work from chronic late payers are making a rational commercial decision. A client that consistently pays 60 or 90 days late is effectively borrowing from you at zero interest. Understanding the true cost of serving each client, inclusive of collection delays, changes how you assess profitability and allocate resources.
According to the GoCardless Pursuing Payments 2025 report, 17 per cent of Australian SMEs lose more than $2,500 per month to late payments, equating to $30,000 or more per year. Some businesses reported losses exceeding $10,000 per month. Additionally, SmartCompany reporting noted 11 per cent of businesses declared losses between $12,001 and $30,000 annually. When you factor in the time cost of chasing payments (6 to 12 working days per year for one in five businesses) and the interest cost of bridging finance, the total impact is significantly higher than the direct financial loss alone.
The GoCardless report found that 63 per cent of Australian businesses are losing money to late payments. Nearly half (48 per cent) are waiting longer for payments than 12 months ago, and 10 per cent have considered closing permanently as a result of payment delays.
The Payment Times Reporting Regulator data shows that SME suppliers wait an average of 35.4 days to receive payment from large business customers. Manufacturing businesses wait an average of 43 days. The federal government's target is for payment times to be well below 30 days.
Yes. The proportion of SMEs losing more than $2,500 per month rose from 11 per cent in 2024 to 17 per cent in 2025, a 55 per cent increase in one year. Nearly half of businesses report waiting longer for payments than 12 months ago. The GoCardless report describes a trend of deterioration, not stabilisation.
Businesses respond in several ways, according to the GoCardless data. Some 26 per cent have considered raising prices to offset delays. Around 23 per cent have considered paying their own suppliers late, creating a contagion effect through supply chains. Others borrow to cover the shortfall, with the RBA noting increased non-bank lending to SMEs since 2022. At the extreme, 10 per cent have considered permanent closure.
If customers paid on time, 24 per cent of Australian businesses would invest in expanding their operations and 17 per cent would directly hire more people, according to the GoCardless report. Late payments are not just an administrative burden. They suppress investment and employment across the SME sector.
Scale Suite provides embedded finance services that give Australian SMEs control over their cash flow cycle. Our team manages receivables tracking, ageing analysis, and collections follow-up as part of your daily operations, not as a quarterly report. Through shared platforms and daily integration, we help businesses reduce debtor days, forecast cash flow accurately, and make informed decisions about client profitability and payment terms.
We review and update articles periodically. At time of writing, all data and sources were current and accurate. Figures are based on publicly available datasets and should not be taken as financial advice.
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