ASIC (Australian Securities and Investments Commission) data released this week shows that 14,152 companies entered external administration or had a controller appointed during FY2025–26 — approximately 75% more than the 8,105 recorded in the pre-COVID 2018–19 financial year. Almost 95% of these insolvent companies had fewer than 20 employees, and cash flow pressures are the most nominated cause of failure of small businesses in Australia.
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Australian small businesses are regularly described as the backbone of the economy. Yet they are also expected to act as an unofficial bank for their customers, providing unsecured and interest-free credit as a routine part of doing business. That is ‘old school’ thinking and that needs to change.
When customers demand extended payment terms, they are effectively asking small businesses to finance their operations. It is time to reset Australia’s payment culture; it is time to change the narrative.
Small business owners face growing pressure on their cashflow
Wages, insurance, WorkCover premiums, energy, software, rent, regulatory compliance and taxation obligations must all be paid when they fall due. This month, payday super started requiring businesses to make superannuation contributions with each pay cycle rather than paying them quarterly. These are not arguments against paying employees properly or meeting legitimate business obligations. They demonstrate the growing mismatch between when a business must pay its costs and when it is permitted to collect its revenue.
A business cannot tell its employees, landlord, insurer or the Australian Taxation Office that its payment terms are 60 days. Why, then, should its customers be able to impose that arrangement on the business?
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An unpaid invoice is a loan
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When a small business supplies goods or completes work before receiving payment, it is financing the customer. Before collecting a dollar, the business may already have paid for:
employees and contractors
materials and stock
rent and equipment
insurance and utilities
GST, tax and superannuation
software, transport and administration.
Many small business owners are using overdrafts, credit cards, or home loans to cover those expenses while waiting for the customer to pay.
The customer receives the immediate benefit of the product or service. The small business carries the cost and the risk. That is not simply customer service. It is a transfer of working-capital risk from the customer to the supplier.
There is already an industry designed to provide credit: banking and finance.
Banks, finance companies and credit providers assess risk, establish repayment terms, charge for the use of money and manage defaults. Most small businesses are not structured, capitalised or regulated to perform that role — and they should not be expected to do it for free.
Size should not determine who carries the risk
The imbalance is particularly concerning when large organisations and government agencies impose lengthy payment terms on smaller suppliers.
A large business or government enterprise may have finance professionals, substantial cash reserves, established banking facilities and significant bargaining power. A small supplier may have an owner working during the day and preparing invoices at the kitchen table that night.
For that supplier, one overdue invoice can mean delayed wages, missed supplier payments, additional interest costs or significant stress for the owner and their family.
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Businesses must start questioning why small suppliers are expected to finance larger and often better-resourced customers in the first place.
Reset the default position
The default should be straightforward: payment is due when the goods or services are provided unless a deliberate and commercially justified credit arrangement has been agreed.
That does not mean every business must demand full payment upfront.
Different industries require different models. A builder may use deposits and progress claims. A consultant may bill at agreed milestones. A wholesaler may approve credit for established customers after conducting appropriate checks.
The important distinction is that credit should be offered as a last resort, not an automatic entitlement given to every customer.
Small businesses can begin resetting expectations by changing the language they use:
“Payment is required before delivery.”
“Payment is due on completion.”
“A deposit is required before work begins.”
“Progress payments apply at each project milestone.”
“Third-party finance options are available.”
These statements establish an important boundary. The business exists to provide its product, expertise or service. It does not exist to provide unsecured finance.
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Technology has also made immediate payment easier. Direct debit, card payments, digital wallets, payment links and automated invoicing mean that lengthy delays can no longer always be dismissed as an unavoidable administrative problem.
Paying promptly is a matter of fairness
Customers should understand that paying a small business late is not merely an administrative inconvenience.
Late payment can affect employees, suppliers, families and local communities. It can prevent a business from hiring, investing in equipment, improving its services or surviving an unexpected setback.
It can also force responsible customers to subsidise late payers through higher prices.
Business owners must have the confidence to set firmer boundaries and reconsider outdated credit policies rather than treating growing debtor balances as an unavoidable feature of business.
Australian small businesses have already carried enough. They should not also be required to carry the financial obligations of their customers.
Australia needs a new payment culture, where credit is provided by credit providers. Small businesses should be paid.
It is time to change the narrative.
