Late payments threaten Payday Super for small businesses

Xero research suggests late customer payments are the biggest reported threat to Australian small businesses meeting Payday Super obligations. The findings are based on a survey of 500 employing small businesses in Australia.

The survey found 84% of respondents said delayed customer payments could prevent them from complying with the new super payment timetable. On average, businesses reported losing $15,257 in the last financial year due to late payments.

Support for the policy itself was high. Some 91% of those surveyed said they supported Payday Super as a positive change for employees, while 87% also said paying super more frequently would add pressure on cash flow.

That pressure extended beyond payroll. More than half of respondents (58%) cited customer payments as their biggest challenge in managing ongoing cash flow, while 57% cited rising cost pressures.

The survey also suggested business owners expect the burden to spill into their personal finances. About 31% said they expected to use personal savings to meet compliance obligations, and the same proportion anticipated needing to borrow.

Others said they would look for a room elsewhere in the business. Around 41% expected to delay paying business expenses, and 38% said they may delay paying themselves to cope with the change.

Growth plans

Xero said pressure on working capital could affect expansion decisions and day-to-day operations. The research found 82% of small businesses expected to delay or reduce investment or growth plans.

Even so, many respondents believed they would adjust within a relatively short period. Nearly a third (31%) expected to adapt to business impacts within three months, while 62% expected to be fully up to speed within six months.

The study covered Australian small businesses employing up to 200 staff. Responses were collected via an online panel and weighted to better reflect the small-business employment market.

Angad Soin, Managing Director ANZ and Global Chief Strategy Officer at Xero, linked the findings to broader concerns about day-to-day liquidity and administrative pressure.

"When one in three small business owners say they may need to use personal savings to meet Payday Super obligations, it's clear this change is about more than compliance. It's about whether businesses have the visibility and control to manage their cash flow with confidence. As margins tighten and pressure builds, real-time insights become essential," Soin said.

Payment delays

The figures indicate a tension between policy support and the reality of collecting cash from customers on time. For many businesses, more frequent super contributions appear manageable in principle but harder to absorb when revenue arrives late, and costs continue to rise.

This has long been a concern for smaller firms, which often have less flexibility than larger companies to manage short-term cash flow gaps. The survey suggests owners expect the tighter payment cycle to increase the need for short-term trade-offs.

Soin said businesses could ease some of the strain by changing how they manage payments and administration.

"The right digital tools and automation can make a real difference. They give businesses better visibility, reduce manual admin, and help bring payroll and payments into a more connected workflow. Even simple steps like offering online payments on invoices - whether that's card, digital wallets, PayTo or direct debit - can help businesses get paid up to twice as fast and improve cash flow," he said.

He said businesses still facing late payments and margin pressure should review their systems before the new requirements take effect.

"With late payments and tighter margins still putting pressure on small businesses, strengthening your systems now will put you in a much better position to meet Payday Super obligations with confidence and let you focus on what matters most for your business," Soin said.