Pandemic-high rates of late business payment risk are creating a domino effect that could stifle SME growth and put thousands of businesses at risk of insolvency, particularly those without adequate cash reserves.

According to CreditorWatch’s June 2026 Business Risk Index report, one registered payment default can make a business 10 times more likely to fail in the following 12 months than the national average.

And with more than 30% of small business invoices not being paid on time, and late payments across the board (60 days plus) at a six-year high, the ripple effects are being felt throughout Australian supply chains.

ScotPac CFO, David Kirwan said the data highlighted how quickly financial stress could move between businesses, and why it is critical for SMEs to have a working capital plan.

“We are increasingly seeing that one payment default can trigger a supply chain reaction that affects multiple businesses,” he said.

“Those waiting on late payments still need to cover essential expenses like wages, tax and inventory – only without the cash they were expecting.

“That pressure flows through the supply chain, affecting everything from customer relationships to credit ratings to hiring and investment decisions.

“For businesses without sufficient cash in reserve, the consequences can be serious.”

Stress points and solutions

Retail, hospitality, wholesale trade, transport, and finance and insurance recorded the largest increases in payment defaults – sectors with greater exposure to high interest rates and rising energy costs.

But with the Middle East conflict continuing to disrupt global trade and cost-of-living pressures weighing on consumer spending, no sector was immune from cashflow stress.

Mr Kirwan said late payments could damage viable businesses long before insolvency became a risk.

“Profitability and cashflow are not the same thing. A business can have strong sales and a healthy order book but still struggle to meet day-to-day expenses if too much working capital is tied up in unpaid invoices,” he said.

“That is where flexible working-capital finance can help prevent customer payment cycles becoming a handbrake on otherwise good businesses.

“The right facility can provide the breathing room needed to maintain operations, protect supplier relationships and keep investing in growth.

“Depending on individual needs, tailored options like invoice finance, asset finance or a line of credit can help businesses pay the bills while customer payment cycles run their course,” Mr Kirwan said.

ScotPac’s latest SME Growth Index found access to credit had become the leading obstacle to hitting business performance targets in 2026, cited by 39% of SMEs.

Mr Kirwan said business finance worked best when arranged as part of forward cashflow planning – not after payment delays had reached crisis point.

“ScotPac has the largest range of fast and flexible working capital solutions to support businesses in any situation. Our expert team is ready to help – whether a business is planning ahead or facing cashflow pressure right now.”

Late Payment Dashboard

  • The Australian Government’s Payment Times Reporting Regulator reports that 68.6% of small business invoices are currently being paid within payment terms.
  • Xero’s March 2026 survey reported small businesses reported losing an average of $15,257 during the previous financial year because of late customer payments.
  • Creditorwatch’s April 2026 Business Risk Index report found payment arrears were at their highest level since January 2020.

 

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ScotPac is Australia and New Zealand’s largest non-bank SME business lender, providing funding to small, medium and large businesses from start-ups to enterprises exceeding $1 billion in revenues. For over 35 years, ScotPac has helped thousands of business owners succeed, offering fast and flexible funding. From simple to complex, small to large, start-up, growth or turnaround – ScotPac can help with a range of funding including Invoice Finance, Trade Finance, Asset Finance, Line of Credit, Business Loans and Asset Based Finance. ScotPac was recently awarded The Adviser Magazine’s Debtor Finance Loan of the Year for a seventh time.

 

For more information contact: Todd Hayward, Mob: 0412 205 151