Almost one in five businesses say overdue invoices are now a major threat to profitability
Late and overdue payments remain a persistent and costly problem for Australian businesses, with new research revealing they are placing significant strain on cash flow, decision making and personal wellbeing across the economy.
In an environment where businesses are closely managing costs and access to finance remains constrained, delays in payment are no longer a minor inconvenience but a key factor shaping business behaviour and confidence.
CreditorWatch’s Business Sentiment Survey of more than 1,000 Australian business decision-makers shows 17% of businesses now rate late payments as one of the top risks to their profitability, while four in five (80%) have experienced late or overdue payments in the past 12 months.
The issue is widespread and structural rather than isolated. More than two-thirds of respondents (68%) said up to 30% of the invoices they issue are paid late, with payment delays averaging 25 days beyond agreed terms. Sole traders typically experience invoices overdue by around 14 days, while small and medium-sized businesses most commonly report delays of between 15 and 29 days.
Larger organisations are not immune either. Ninety-four per cent of businesses with 200 or more employees reported dealing with late or overdue payments in the past year, highlighting that scale alone does not protect against payment risk.
The survey findings mirror trends identified in CreditorWatch’s latest Business Risk Index, which shows, while insolvencies eased temporarily in 2025, momentum has shifted with renewed pressure evident across several sectors.
Trade payment defaults and overdue invoices – critical early-warning indicator tracked in the Business Risk Index, have also deteriorated again, returning in January close to previous highs. This reinforces the role late payments play in amplifying financial stress and pushing otherwise viable businesses closer to failure.
Cash-flow strain and personal consequences
Late payments are having tangible consequences for business owners and operators. While 80% of businesses say they are currently satisfied with their level of working capital, the survey suggests this stability is fragile. More than half (56%) of businesses surveyed reported challenges accessing finance, citing high interest rates, complex application processes and collateral requirements as key barriers.
As a result, many businesses are increasingly self-funding to stay afloat. Sixty per cent of respondents have used personal funds to support working capital in the past 12 months, including 47% of sole traders and small businesses.
The personal toll is significant. Personal stress is the most reported consequence of late payments, cited by 43% of respondents, rising to 57% among sole traders. More than a quarter (26%) said late payments caused them to fall behind on loans, rent or utility bills, while 24% reported increased debt or delayed payment of their own wages.
For more than one in five businesses (22%), late payments also affect their ability to deliver on contractual or service obligations to other customers, with large businesses particularly impacted in this area.
Businesses taking action, but not without challenges
In response, businesses are actively looking for ways to protect their cash flow. Almost nine in 10 respondents (88%) have used or plan to use at least one strategy to reduce late payments, including avoiding customers with a history of overdue invoices (37%), requiring partial payment upfront (34%), shortening payment terms or imposing penalties for late payment (both 24%).
However, chasing overdue invoices remains difficult. Nearly three-quarters of businesses (73%) say they face challenges when following up late payments, most commonly due to concerns about damaging customer relationships. More than one in four (28%) worry clients will reduce or cease doing business with them, while 25% say they don’t want to upset their customers and 19% find the conversation uncomfortable or awkward.
Power imbalances also play a role, particularly for larger organisations, where 23% cite this as a significant challenge, compared with smaller businesses. Together, these responses highlight a tension many businesses are facing: the need to protect cash flow while avoiding actions that could damage long-term customer relationships.
A broader economic signal
According to CreditorWatch, the findings underscore how late payments continue to act as a hidden handbrake on business confidence and growth.
“Many Australian businesses are operating with very little buffer,” said Patrick Coghlan, CEO at CreditorWatch. “Even when they’re technically profitable, late payments are stretching cash flow to the point where owners are delaying decisions, dipping into personal savings and taking on risk they shouldn’t have to carry.
“When payment delays become normalised, the pressure doesn’t disappear, it’s pushed down the supply chain. That has real consequences for confidence, growth and the willingness of businesses to invest, hire or take on new work.
“Improving payment practices would help unlock working capital already earned by businesses, reduce stress on owners and operators, and support healthier growth across the economy,” Coghlan concluded.
Cash Flow
defaults
insolvency
small business
SMEs
sole traders
survey results
Head of Media & Communications
Michael joined CreditorWatch in July 2021. He has more than 20 years’ experience in business journalism, marketing and communications strategy and digital content development. He is passionate about communicating to the business community how CreditorWatch’s product suite can help them grow and protect their companies.
14-Day Free Trial
Get started with CreditorWatch today
Take your credit management to the next level with a 14-day free trial.
