60-day payment terms are killing small suppliers: the cash flow reality
ASIC released insolvency data this week: 14,152 companies entered external administration in FY2025-26, up 75% from pre-COVID levels. Nearly 95% had fewer than 20 employees. Cash flow pressure is the most cited cause of failure.
The underlying problem is structural. Small businesses must pay wages, super, insurance, rent, and tax when they fall due. They cannot tell the ATO or their landlord that payment terms are 60 days. But their customers can impose exactly that arrangement on them.
The working capital gap
When a customer demands 60-day terms, the supplier is providing unsecured, interest-free credit. Professional services firms typically carry 30-60 day receivables; best-in-class operations target 20-30 days through milestone billing and tighter terms. But many B2B segments have normalised 60-day cycles, leaving smaller vendors financing larger customers' working capital.
The Payment Times Reporting Scheme makes these practices visible. Latest government data shows big businesses paying 69.2% of invoices within 30 days, with an average payment term of 35 days. That is improvement, but still materially slower than the cash needs of most SMEs.
Why this matters for sales teams
If you are selling to SMBs, understand that payment terms directly affect their ability to buy. A 60-day cycle might be standard in your procurement process, but it could be forcing your customer to use invoice finance or delay other investments.
For AEs at smaller vendors: this is a negotiation point. Quote shorter terms, offer early payment discounts, or build payment milestones into contracts. Every day you shorten the receivables cycle improves your company's cash position.
For enterprise teams: payment terms are part of the deal structure. If your procurement team insists on 60 days, that cost shows up somewhere: higher prices, strained supplier relationships, or vendors who cannot afford to service your account properly.
The article framed this as small businesses being expected to act as banks. From a sales perspective, it is simpler: payment terms are working capital allocation. When you extend them, you are asking your supplier to finance your operations. That has a cost, even if it does not appear on your P&L.
Payday super started this month, requiring super contributions with each pay cycle instead of quarterly. That tightens cash flow timing further for small employers. If your customer base skews SMB, expect more payment term negotiations in the next 12 months.