We’ve all heard it—”Invoices must be paid within 30 days.” Yet, despite this rule being enshrined in law, late payments are still rampant in many industries. This is a serious issue, especially for small businesses like mine, and it’s something the Public Service Commission (PSC) is concerned about too. Recently, PSC Commissioner Anele Gxoyiya called out the ongoing problem of invoices not being paid on time, saying it’s essentially a violation of the public.
According to Gxoyiya, the total number of unpaid invoices older than 30 days by national departments hit a shocking 1,651 by June 2024. That’s R97 million just sitting there unpaid. And it gets worse—the total number of invoices paid late in just the first quarter of the 2024/25 financial year stands at a staggering 30,571, with a value of R1.7 billion. When departments don’t pay on time, the ripple effects can be devastating for businesses like ours.
As a small business owner, I know just how damaging late payments can be. Stats show that over 50% of small businesses experience late payments, and a large number of those take longer than 60 days to get paid. This can lead to cash flow problems, delayed projects, and in some cases, even closures. In fact, research has shown that around 37% of small businesses that fail cite cash flow as a primary reason—and late payments are a huge part of that.
But we can’t just sit back and wait for the system to change; we need to find ways to keep our businesses going even when the payments don’t come in on time. So, here are three tips I’ve learned to help manage late payments:
- Build a cash reserve: One of the best ways to stay afloat is to keep some funds in reserve. It can feel impossible, especially when you’re waiting on big payments, but setting aside a portion of your income each month can help you cover basic expenses when cash is tight.
- Automate your invoicing and follow-ups: Sometimes, payments are delayed simply because invoices get lost in the shuffle. Use invoicing software to send automatic reminders. It helps keep your clients on track without needing to chase them constantly.
- Negotiate upfront payments: For new clients or big projects, don’t hesitate to ask for a percentage of the payment upfront. It’s a standard practice in many industries, and it can significantly reduce the pressure on your cash flow.
Late payments are an unfortunate reality for many of us, but with the right strategies in place, we can mitigate the impact on our businesses and stay resilient in tough times. Let’s keep pushing for change while also protecting ourselves from the challenges late payments create.