SME Trade Credit:

the case for a new model

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Establishing trade credit terms is a common, and necessary, business practice among companies.

In Australia, SMEs provide trade credit estimated at over $1.3 trillion per year. The use of trade terms is so widespread that, if combined as a source of capital, it would create the 5th largest bank in Australia by outstanding assets. Despite its size, there has been limited innovation recently in the provision of trade credit. The outdated processes and methods that have prevailed mean that the provision of trade credit in Australia is highly inefficient and ineffective.

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Receivables and net terms: a chronically inefficient model

  • Trade credit terms are the backbone of most supply chains and account for 10% to 40% of SME’s total assets.
  • By extending trade terms, SMEs are often taking on the role of a bank: running an in-house trade credit function can cost up to 3%-4% of sales.
  • 93,000 people are employed in accounts receivable in Australia, when by comparison, the total number of bank employees in the country is only 132,000.

Need a better trade credit solution? Shift Payments could help

Shift Payments is a platform that streamlines trade credit through a flexible trade account. It can be used to pay rent, wages and supplier invoices, removing the stress of trade terms for buyers and suppliers. With Shift Payments, suppliers get paid immediately every time. Buyers have more control over their payment terms and accounts payable. It’s a win-win that improves cash flow all around so businesses can go back to doing what they do best.
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Shift has allowed me to reduce my receivables, while increasing my sales. It means I can focus on my business and no longer need to manage the day-to-day burden of accounts”.

Ali Arshad, Capra Timber