In a recent report released by GoCardless, the impact of the ongoing cost-of-living pressures on the financial stability of small and medium businesses (SMB) in Australia is brought to the forefront.
The report sheds light on how the cost-of-living crisis, among other factors, is affecting businesses nationwide. A concerning 55% of business leaders express worries about a potential increase in late-paying customers over the coming year. Compounding this concern is the revelation that half of the respondents admit to avoiding uncomfortable money discussions with their clients.
Moreover, the report emphasizes the tangible repercussions of avoiding such conversations. A staggering 86% of respondents who have chosen to circumvent money talks report experiencing negative effects. Notably, 19% of respondents estimate annual business losses ranging from $6,000 to $30,000 due to delayed payments.
Millennials are more than twice as likely as Baby Boomers to agree that they’d feel uncomfortable asking customers for Payment (42% compared to 20%), suggesting a generational gap exists regarding how business leaders operate and interact with customers.
When it comes to feeling ‘awkward’ about money, millennials were also significantly overrepresented in the findings, with three in five (62%) of millennial business leaders agreeing they’d feel uncomfortable chasing customers for late payments, compared to 40% of Gen X and 36% of Baby Boomers.
Half of all millennial business leaders also agree they now find it harder to talk about money with customers than before the rise in the cost of living. 70% of millennials are also concerned the problem of late-paying customers is only set to worsen this year as the cost of living rises.
The data also reveals a gender gap in payments confidence, with 29% of women agreeing they’d feel uncomfortable asking customers for payment, this rises to almost half (46%) when it comes to chasing late payments. However, only 26% of men feel uncomfortable asking for payments and 40% share this experience chasing payments.
Stress and operating costs pushing business
Respondents who have sidestepped money conversations have reported numerous negative repercussions for businesses and their leaders, including:
- A personal increase in stress for business leaders (43%)
- Elevated stress levels in the workplace (37%)
- Instances of late payments to their business (36%)
- Financial losses incurred by their business (31%)
Conversely, businesses are now more inclined to engage in conversations about late payments with customers compared to last year due to several reasons:
- Rising operating costs, heightening the urgency of payments (55%)
- Realizing that customers were receptive to such conversations (44%)
- Frustration over not receiving owed payments (34%)
Luke Fossett, General Manager, at GoCardless, said:“Despite some optimism emerging late payments will continue to cause a cashflow crunch for already struggling SMBs in 2024 – businesses need to acknowledge this and adapt quickly to stay on top,” Fossett says. “For those wishing to avoid more uncomfortable money conversations, there are practical solutions, such as avoiding payment options with high failure rates, automating follow-ups on unpaid invoices and offering payment methods that reduce the onus on your customers such as Direct Debit or PayTo, which automatically pull money from a customer’s bank account. For recurring payments, all they need to do is set up the payment once and then forget about it.”
Seeking solutions to the payment nightmare
The Pursuing Payments report reveals that among those who say they would avoid talking about money with their customers, Millennials and Gen X are at least seven times as likely as Baby Boomers to admit they wouldn’t know how to broach late payments with customers.Those millennials who say they are now more likely to have conversations about late payments with their customers compared to last year, were also roughly twice as likely as Gen X and Baby Boomers to reason that they’ve either found an effective way to chase payments or received support or training to feel more confident to ask for late payments.
Millennials and Gen X (85% and 68%, respectively) are also more likely than Baby Boomers (51%) to be interested in introducing technology – such as automated invoicing, PayTo, or payment platforms to get paid more quickly.
GoCardless customer and owner of Melbourne-based Dukes Gym, Jonathan Quieros, was surprised to hear that 62% of his fellow Millennials are uncomfortable chasing late payments: “I think it comes with experience. If you’re being clear and transparent with what you’re doing, then it’s not rude. It’s just like you wouldn’t go to a restaurant, eat the food and then be surprised when you’re asked to pay,” Quieros says. “I think the reason that I feel like that is our charges are transparent, upfront, clear, and easy to understand from the very start. We try and make it so there are no options for misconceptions or misunderstandings.”
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