Pleas for assistance with business insolvency matters have jumped 50%, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) says, showing the extent and severity of the cash flow crunch.
The ombudsman received 6,254 requests for help over the 2023-2024 financial year, a 10% increase from the year prior, according to a summary of its June quarterly report.
Requests for help with insolvency — either from those considering insolvency, or those worried an insolvent business owed them money — jumped significantly.
The ASBFEO registered nearly 140 requests in that category last financial year, up from around 90 requests in 2022-2023.
Disputes over payments also made up 42% of the total requests for help received by the ASBFEO, well above the 26% average between 2016 and 2024.
Ombudsman Bruce Billson said the data outlines the intense pressures faced by small businesses.
“Cash flow is the oxygen of enterprise, but difficult conditions mean when one party is late in paying, it can cascade through the supply chain,” he said in a statement.
“Over the past year, small and family business owners have become increasingly worried about being paid as they face challenging business conditions which has seen a record number of corporate insolvencies,” he continued.
The construction sector contributed the most requests for help with payment disputes, reflecting the tense relationship between subcontractors and customers in a field with shrinking margins for error.
And outside of the well-known challenges facing the construction sector, the ASBFEO said payment disputes in the hospitality sector — another industry dealing with surging costs and uncertain consumer spending — tripled over 2023-2024.
Small businesses are not only waiting for payment from fellow SMEs, ASBFEO data shows.
Disputes between small businesses and big businesses rose 4% over the year, as per the ombudsman’s most recent quarterly report.
“These small businesses simply want payment for the work they have undertaken,” it said, noting that large businesses often have the power to rebuff a small suppliers’ payment terms.
“For example, a small business owner contacted us for information as their standard payment terms were 14 days,” it said.
“The other business had told them that they had to accept payment terms of 30 days as part of their commercial relationship.
“We provided information on contracts and negotiations.”
Measures like the Payment Times Reporting Scheme are in place to encourage on-time payments from big businesses to their smaller suppliers.
After a review led by Billson, the federal government in December pledged to strengthen the scheme and its name-and-shame register showing businesses that fail to pay suppliers in a reasonable timeframe.
Yet in the latest quarterly report, the ASBFEO suggested some small businesses are unsure of the register’s benefits.
“For example, a small business owner contacted us asking what the point of the Payment Times Reports Register is,” the report said.
“In their experience, it fails to provide relief to small businesses as large businesses are still failing to pay them on time.
“Their business was suffering as a result. They were putting their own personal funds into the business to keep it afloat.”
With trading conditions continuing to challenge small businesses, Billson encouraged hard-hit traders to reach out.
“We happily provide a type of triage service to receive the dispute and then assess whether we are best equipped to help or whether the small business will be best served by sending their case, with their permission, to the most appropriate federal or state agency,” he said.
Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on LinkedIn.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
