Late payments cost Australian small businesses an estimated $1.1 billion last year, based on what they could have earned on the money, a cloud accounting platform has found.
Some 48 per cent of invoices issued by Australian small businesses in 2021 were paid late, on average by 6.4 days, according to its research.
Xero arrived at the $1.1 billion figure by applying current interest rates for small and medium businesses to aggregate small and medium business sales.
The figure is contained in a report by Xero and Accenture on cash crunches facing small businesses being released at the Xerocon Sydney conference on Wednesday.
The cash flow insights were based on Xero small business accounting data, for companies with less than 200 employees and less than $50 million in sales.
"Late payments create a flow-on effect for small businesses, creating unnecessary accounting complications and threatening owners' ability to meet their own obligations - such as rent or wages - in time," Xero Chief Customer Officer Rachael Powell 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."
Xero said that cash flows actually improved in 2020 and 2021 due to high levels of government support for small businesses during the pandemic, but the average Australian small business still experienced 4.2 months of negative cash flow in 2021.