Cash flow problems are widespread among South African small businesses. Xero’s 2026 State of South African Small Business report found that 62% of respondents had experienced cash flow issues during the previous year. The research covered 427 small businesses surveyed between January and February 2026.
Other Xero research gives some context to the payment problem. In its 2024 South African survey, 46% of respondents said they spent one to two months each year chasing late payments. Among businesses experiencing cash flow problems, 72% had used personal funds to keep the business going.
A separate Xero survey found that more than a quarter of South African small businesses were owed money outside their agreed payment terms. Of those businesses, 45% were waiting for more than R100,000 in late payments.
Government suppliers face their own payment pressures. National and provincial departments paid R45.3 billion in invoices more than 30 days late during the 2025/26 financial year. That involved 475,421 invoices. At the end of March 2026, a further R16.8 billion across 88,403 invoices remained unpaid beyond 30 days.
Some businesses can absorb a delayed customer payment with little disruption. Others have a cost base that moves much faster than their receivables. For those companies, the structure of the business can make late payment a recurring funding problem.
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The Businesses Most Exposed to Late-Paying Customers
Late payment can affect almost any company, but some business models have much less room for delays. These businesses tend to have a combination of high upfront costs, long billing cycles and substantial amounts owed by customers.
1. Professional services firms with extended billing cycles
Consultancies, engineering practices, IT providers, marketing agencies and other professional services firms can have a substantial amount of work completed before payment is due.
Payroll continues on its normal schedule. Contractors need to be paid. Software subscriptions, premises and professional costs continue as well.
For a firm with several active client accounts, outstanding invoices can accumulate while the business continues delivering work. The finance team may then spend considerable time following up on accounts while the owners focus on clients and new work.
Xero’s 2024 research found that 46% of South African respondents spent one to two months chasing late payments. That is a substantial administrative commitment for a small team.
2. Construction and project-based businesses
Construction has a different cash cycle from many service businesses.
Contractors may have to fund materials, subcontractors, equipment, transport and wages during a project. Billing can be linked to completed stages of work, certifications or agreed milestones.
A delay in one payment can therefore have consequences for the next stage of the project.
The contractor still has commitments to meet even though the customer has yet to settle the invoice.
The same issue appears in engineering, installation, manufacturing and other project-led businesses. Revenue can be substantial while cash availability remains constrained by the timing of customer payments.
3. Wholesalers and distributors
Wholesalers and distributors often have cash tied up in stock as well as unpaid invoices.
A customer may receive goods on agreed credit terms while the supplier has already paid manufacturers or other suppliers. If several customers pay late at once, the distributor can find itself short of the cash required to replenish stock.
This creates a difficult cycle. Strong sales can increase the amount of money tied up in receivables. A growing order book can therefore create additional funding pressure if customer payments lag behind purchases and operating costs.
4. Businesses dependent on a few large customers
Customer concentration creates another source of exposure.
When a small group of customers accounts for a large share of revenue, a delayed payment from one account can have a disproportionate effect on available working capital.
This is common among specialist suppliers that serve larger companies or government departments. The supplier may have a strong trading relationship with its customer yet still have little control over internal approval and payment processes.
5. Government suppliers
Government contracts can provide substantial work for smaller companies, but payment delays can create pressure when the supplier depends on those receipts to fund ongoing operations.
The 2025/26 government figures provide a useful indication of the scale involved. More than 475,000 government invoices were paid over 30 days late during the financial year.
Treasury’s quarterly reporting also records reasons supplied by departments for late or unpaid invoices, including budget constraints, financial system problems, disputed invoices, supply chain management issues and delays in processing and authorisation.
For a small supplier, the issue is less about the size of the overall government payment backlog and more about what a delayed invoice means for its own monthly cash position.
6. Fast-growing businesses
Rapid growth creates a less obvious form of exposure.
A company taking on more work needs additional resources to deliver it. Recruitment may increase. Stock requirements may rise. Production capacity may need to expand. Suppliers may require payment on tighter terms as purchasing volumes increase.
Customer invoices can grow at the same time.
This creates a financing gap between the cost of fulfilling new business and the point at which customers settle their invoices. A company can therefore encounter cash pressure during a period of strong sales.
Growth does not remove the need for working capital. In some cases, it increases it.
The risks of late customer payments
Late payment puts pressure on the part of a business that keeps everything else moving: working capital.
Profit recorded in the accounts does not pay a supplier. An invoice in the debtor ledger does not fund payroll. Until the customer pays, the business still has to finance the activity that follows the sale.
That can create difficult financial decisions. Owners may turn to overdrafts, personal savings or short-term borrowing to bridge the gap. Xero found that 72% of South African businesses experiencing cash flow problems had used personal funds to keep operating in its 2024 research.
Late payment can also distort business planning. A company may have enough confirmed work to keep its team busy but lack sufficient available cash to take on that work comfortably. Sales growth then creates another financing requirement.
The administrative cost should also be considered. Xero’s research found that 46% of South African small businesses spent one to two months each year chasing late payments.
That is a substantial amount of management time devoted to collecting money that the business has already earned.
The deeper issue is the mismatch between revenue and cash. A business can record sales successfully and still have too much capital locked in its debtor book. When that happens repeatedly, late payment becomes part of the company’s financial structure rather than an occasional nuisance.
How Invoice Factoring Puts Cash in Your Hands
Invoice factoring means selling your unpaid invoices to a funder. Once an invoice is verified, you receive most of its value within a short time.
The money is tied to work you have already done and billed. That makes invoice factoring a different kind of product from a traditional loan, which looks mainly at your history, your assets and your credit record. Because the funding grows as your sales grow, it suits businesses whose cash needs rise and fall with their order book.
The fee is agreed at the start, which gives you a known figure to plan around in place of a payment date nobody can promise. Many owners find that this predictability is what lets them hire, buy stock and pay suppliers on time.
Getting Paid Sooner with Geddes
Geddes provides invoice factoring for South African SMEs that have suitable customer invoices and need access to working capital tied up in receivables.
Eligible businesses can submit invoices through our online application platform, with cash typically reaching your business within five days of submission once invoices have been verified.
Our service can be particularly relevant to businesses with recurring customers, a diversified debtor book and agreed payment terms. It can also help companies that want to offer credit terms to customers without placing the full cash burden on their own balance sheet.
If late payers are holding your business back, get in touch with the Geddes team.