Earlypay warns SMEs on late payments as costs rise

Earlypay has urged Australian small and medium-sized businesses to review their working capital as late payments reach a six-year high, following new CreditorWatch data showing rising business-to-business payment arrears.

CreditorWatch's latest Business Risk Index shows more invoices moving beyond 60 days overdue as operating costs, energy prices, interest rates and tax debt strain cash flow. The findings point to worsening payment delays across the SME sector as many businesses also face higher payroll and supplier costs.

Earlypay Chief Executive Officer James Beeson said the start of the financial year gave owners a chance to assess whether their cash position matched their plans.

"Late payments are at their highest level in six years, and that tells us cash-flow pressure is spreading through Australian businesses," Beeson said.

He said employers also needed to plan for changes to wage costs. From 1 July 2026, the Fair Work Commission will increase the National Minimum Wage to $1,004.90 per week, or $26.44 per hour, while minimum award wages will rise by 4.75 per cent from the first full pay period starting on or after that date.

"Adding to those pressures, Payday Super and the Fair Work minimum wage increase are two immediate changes business owners need to build into their plans for the year ahead," Beeson said. "Combined with broader pressure on fuel, energy, stock, freight and other inputs, they make forward-looking cash-flow planning more important than ever."

The wage increase directly affects award-reliant and lower-paid workforces, but Beeson said its impact can spread more widely. He argued that rises at the minimum and award level often influence salary expectations across the broader labour market.

"Wage increases at the minimum and award level often become a reference point for the wider labour market," he said. "For many SMEs, that can mean upward pressure on the overall salary cost base, not just for employees directly covered by the increase. In a market where businesses are already managing late payments, higher input costs and tax obligations, even a modest increase in payroll costs can affect cash flow and margins."

Sector strain

CreditorWatch's data highlighted particular pressure in the transport and manufacturing sectors. Transport, Postal and Warehousing recorded a rolling annual insolvency rate of 1.24 per cent, while Manufacturing reached 1.13 per cent.

More than 7 per cent of invoices in the transport sector were more than 60 days overdue. That is significant for sectors with large labour, fuel, materials and supplier bills, where sales and profitability may not translate into immediate cash in the bank.

"Profit and cash are not the same thing," Beeson said. "A business can record a sale but still be waiting weeks or months for the money to arrive, while wages, tax, superannuation, suppliers and other operating costs must be paid on time."

Businesses face different pressures depending on their circumstances. Some may be seeking funds to take on more work, recruit staff, increase stock, invest in equipment or expand into new areas. Others may be trying to manage the gap between outgoing payments and delayed customer receipts.

Beeson said that a mismatch can become acute when a business secures new work but must spend before receiving payment.

"A business may win an excellent new contract, but then need to employ more people, buy stock, pay suppliers or invest in equipment before the customer payment arrives," he said. "That is where working capital becomes a strategic issue. It is not simply about helping a business get through a difficult period. It is also about giving owners the capacity to act on opportunities when they present themselves."

Adviser role

Earlypay also pointed to a wider role for finance brokers and accountants in helping SMEs map out funding needs before they become urgent. Rather than focusing only on a single financial transaction, advisers can help business owners examine expected commitments over the next 12 months and test how changes in customer payment timing or costs could affect liquidity.

That includes reviewing exposure to customer defaults, debtor concentration, shifts in market conditions, and the possibility of unexpected cash flow disruptions. For firms considering major commitments, a clearer picture of working capital may offer more certainty before decisions are made.

"Most SME owners are busy running the business, serving customers, managing staff and keeping operations moving," Beeson said. "A good adviser can help owners step back and look beyond a single transaction. That means understanding what the business wants to achieve, what it will need to fund along the way and whether its current cash position and funding arrangements are ready to support it.

"Those conversations are most valuable before the business has committed to a new contract, investment or expense, rather than after a funding gap has already appeared."

Beeson said businesses should use the new financial year to review upcoming commitments, update cash-flow forecasts and consider how they would respond if customers paid later, costs rose, or a new opportunity emerged.

"There are risks in the market, but there are also real opportunities," he said. "Businesses cannot predict everything that may happen over the year ahead, but they can understand where they want to go and what their cash flow will need to deliver. Your plans are only as good as the cash flow available to support them."