Are you tired of chasing slow payers and hoping the cash will start flowing faster in the upcoming financial year? You and scores of other Australian business owners and leaders.

But faster payment cycles aren’t something that can be banked on, any time soon. In fact, given the economic conditions we’re currently experiencing, it’s more likely we’ll see the opposite: businesses dragging their heels when it comes to settling with their suppliers.

Insolvencies on the up

A significant minority will end up not settling at all, given corporate collapses are on the rise in this country. That trend looks set to continue over the upcoming six months and possibly well beyond, as ongoing economic pressures take their toll.

‘Interest rate rises are going to bite in particular industries and in overleveraged businesses this year,’ Turnaround Management Association chair and Baker Mckenzie partner Maria O’Brien opined in an article published by the Australian Institute of Company Directors, in January 2024.

‘So you would have to say with some confidence it’s probably going to be busier this year in insolvencies than it has been in the past few years.’

The construction and accommodation and food services industries have been particularly hard hit; together accounting for 43 per cent of insolvency reports in the 2023 financial year, according to ASIC’s latest annual corporate insolvency report.

Slowdown struggles

When businesses are struggling to stay afloat, they’ll typically try to extend the payment cycle; paying creditors sporadically, or in dribs and drabs, and leaving invoices sitting overdue for as long as possible.

Suppliers on the receiving end of these slowdown tactics may soon enough find themselves experiencing financial challenges of their own. Not being paid promptly can result in their having to employ stalling tactics to keep their own creditors at bay, or turn to finance facilities to shore up their cash flow. Doing the latter can damage their profitability and impede their ability to achieve healthy growth.

The battle to be paid

If this sounds wearyingly familiar, to you and your hardworking finance team, you undoubtedly already know how challenging and time-consuming chasing up the funds you’re rightfully owed can be. And if you’re relying on manual processes to pursue your creditors, it can also be very expensive.

Studies have shown that businesses can spend between five and 20 per cent of the invoice value on debt collection efforts.

If your debtors list includes a long string of poor payers, chasing them up and pinning them down can quickly add up to a sizeable slice out of your profit margin.

Exploring the automation advantage

The good news is, there is a better way. Automating the debt management and collections process can accelerate the payment cycle and enable your business to pursue late payers before their debts become seriously delinquent.

With the right cloud-based platform in place – one that combines billing, dunning and collections in a single automated solution – you can manage collections proactively, reduce sales outstanding and improve cash flow.

Reminders can be deployed to prompt customers to settle their overdue invoices, and triggers sent to AR and collections teams to commence the dunning process if they fail to do so within a specified time period. The ability to suspend accounts automatically when bills aren’t paid as promised takes the hard work and hassle out of limiting losses and protecting the bottom line.

Getting smarter about collections

If you choose a platform with a sophisticated data analytics function that allows you to enjoy real time visibility into your debt management process, you’ll have the intelligence you need to optimise your collections strategy on the fly.

As always, the numbers tell the story.  Companies that use advanced collections software can reduce the time to collect payments by 20-30 per cent.

Protecting your profitability in uncertain times

Unless it’s a cash only enterprise, unpaid debt can create significant financial challenges for your business. Implementing ultra-efficient, automated debt management and collections technology can help you mitigate risk at a time when doing so has never been more important. If maintaining cash flow and profitability is a priority in FY2025, it’s an investment you’d be well advised to consider.

Carl Warwick is regional sales director for Asia Pacific and Japan at BillingPlatform.