Small Businesses Struggling to Get Paid on Time in SA

Small Businesses Struggling to Get Paid on Time in SA

Large corporations in South Africa are ‘using small businesses like a line of credit’. That’s the word from the Small Business Institute (SBI), an organisation that promotes and supports sustainability in the small business sector.

In its role as the ‘Big Voice for Small business’, the SBI reports that it takes 101 days, on average, for big business to pay their smaller service providers – and that is after the 30-day target.

Outstanding debtor days at record levels

In a separate consumer credit report by the Business Debt Index (BDI), it was revealed that outstanding debtor days soared to record levels in the second quarter of 2019.

A year ago, the average payment turnaround time on small business invoices was below 60 days. Now, SMEs have to wait for an average of 66,4 days to get paid.

For an increasing number of micro-enterprises, that is simply too long.

Government owes SA businesses billions of rand

It is not only big business that is responsible for the estimated 70 percent SME failure rate in South Africa. Government is a major culprit.

In a recent question and answer session in parliament, it was divulged that government currently owes South African businesses more than R7,1 billion in unpaid invoices older than 30 days.

How late payments are impacting small businesses

The impact of late payments on startups and SMEs is devastating. Small companies, more than their larger counterparts, require a predictable income stream.

Without a positive cash flow, business owners are unable to meet their financial obligations – paying staff and suppliers on time, settling utility bills and upholding rental agreements.

In addition to the added stress of managing tight finances, emerging entrepreneurs are forced to spend more time on debt recovery, rather than focusing on core business. Productivity consequently takes a major knock – something startups and SMEs can ill-afford.

Culture of late payment killing off SMEs

The culture of late payment in the public and private sector is not only hampering small business growth in South Africa, it is killing off existing micro-enterprises at an alarming rate.

As many as 70 percent of small businesses fold in the first two and a half years, and less than 20 percent of startups prosper and flourish.

How can small business owners generate positive cash flow when there’s no money coming in to the business? One option is to liquidate a personal or business asset, like a car, truck or bakkie… but without selling it.

Cash flow crisis? One option is a vehicle-backed loan

With Pawn My Car, you can use a vehicle that’s in your or your company’s name to secure a loan quickly and easily, with no delays or laborious paperwork.

For example, help your small business survive a cash flow crunch by using a paid-up truck, bakkie, motorbike, utility van or personal or company car to get an immediate cash loan.

For more information, contact us on 086 172 9648 or simply complete and submit our online application form.

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