Late payments continue to hamper small business owners, with many pointing out that getting paid on time is the number one financial challenge, according to new research by cloud accounting software provider Xero.

Small and medium enterprises are the most affected by late payments because their cash flows are generally weaker than those of their larger, more established peers.

The Xero research, highlights that small business owners spend 1.3 days per month chasing invoices, with the average invoice paid 10 days late. The worst affected sector is healthcare, where businesses spend 2.6 days a month chasing invoices, followed by manufacturing and utilities, and architecture, engineering and building at 1.5 days each. Port Elizabeth businesses are the most affected (1.5 days), ahead of those based in Johannesburg (1.1 days).

Xero surveyed 517 small businesses across SA with between 1-20 employees.

The research also reveals that:

• Late payments have caused cash flow issues for 32% of respondents, while 18% blame them for reduced morale and 16% feel late payments result in reduced productivity.

• The main factors believed to be responsible for late payments include the fact that customers are waiting for payments themselves (24%), customers are disorganised and cannot track their payables (23%) and that customers have set internal payment terms for paying invoices, regardless of supplier terms (23%).

Late in 2016 Minister in the Presidency Jeff Radebe told Parliament that the Cabinet had agreed "to take a harder line" on departments that did not adhere to the payment of suppliers on time. State officials who fail to pay suppliers and service providers within 30 days will now be guilty of misconduct.

The Cabinet recently approved the establishment of a special unit to tackle invoice backlogs. The unit will be located in the Department of Planning, Monitoring and Evaluation, which will work with the Treasury and the Department of Public Service and Administration. Its mandate includes investigating late payment or failure to pay invoices, identifying the causes of this, and facilitating and instituting misconduct proceedings to ensure there are consequences. It will also support or intervene where there is continuous noncompliance.

Commenting on the Xero research, Marnus Broodryk, CEO of The Beancounter and Shark Tank SA said: "Late payments are a big problem for many small businesses. The resulting issues with cash flow can stifle growth and even put entrepreneurs out of business … Xero’s research shows that more needs to be done to boost [small business] if our economy is going to succeed.

"The amount of time wasted chasing invoices is a scandal. Small business owners should also take steps to mitigate the problem and make sure they get paid on time."

Gary Turner, an MD at Xero, said the issue of late payments should be given more prominence, with more education needed on how business owners can improve cash flow.