The problem of late payments is a recurring one for Australian small businesses. The average business was paid four days late at the end of 2017, Xero data shows.

But a closer look reveals two Australian locations that stand out: Tasmania and the Australian Capital Territory, where businesses get paid on time or even early.

If paying late is common across Australia, what do these two locations do differently? And are there practices that other states and their small businesses can adopt to shorten their own payment times?

First, let’s look at the numbers. On a 30-day invoice at the end of 2017, Tasmanian small businesses were paid in an average 30.3 days. In the ACT, it was even faster: 28.2 days. That number has dipped as low as 27.6 days in the past year.

Meanwhile, businesses in Victoria and New South Wales waited 35 days for payment at the end of 2017 — almost one week longer.

Part of Tasmania’s secret may lie in its size. It has just 500,000 residents, or one-tenth the population of neighbouring Victoria. That means there are fewer degrees of separation between Tasmanians than in larger states, says Andrew Pearce, director of Collins SBA, a Hobart-based financial advisory firm.

In construction, an industry Pearce serves, builders would probably recognise the name of every other builder in Tasmania, whether through word of mouth or seeing their signs on a project. There are few unknown businesses unless someone is brand new to the island.

Many business owners understand that if they don’t pay on time, they’ll get a reputation, says Pearce. In a bigger state, they might be able to run through different groups of tradespeople or business partners before their name caught up with them. Or they might move across the state line.

“It’s hard to go just outside our state to find new customers or tradespeople because of the water barrier,” says Pearce. “You’re on an island. Everyone who operates here is aware of that.”

The Bush Capital

A similar dynamic may be at play in the Australian Capital Territory. It’s hard to ignore that, like Tasmania, the ACT is a bit of an island. A look at a map shows the territory is largely nature reserves and mountains, except for Canberra. Residents in the city of 400,000 people affectionately call it “The Bush Capital.” Leave the ACT, and it’s a 300-kilometre drive to the next population centre as large.

While geography may play a role, the ACT’s quick payment times are clearly helped by two other factors, says Don Grgic, a small-business advisor at Canberra-based Business Boost Centre.

The first advantage is that the federal government is the biggest customer around. And the government tends to pay on time. Federal agencies say they settle 96 percent of their small-business invoices within 30 days, according to a recent survey from the Minister of Small Business.

The second advantage is that the ACT boasts Australia’s most educated population — and it’s tech-savvy. About 1 in 3 people in the ACT hold a bachelor’s degree, compared with 1 in 6 for the rest of Australia, according to the demographic group .Id

“My small-business clients are quick to adopt cloud-based solutions that streamline their business, whether it’s to send payment reminders, handle payroll or manage job orders,” says Grgic.

Learn from the best

So what can larger states do to emulate the ACT and Tasmania?

While it’s hard to replicate the geography of Tasmania, there are apps that create a de facto, small community where businesses alert each other to bad debtors. CreditorWatch is one example. It identifies new customers who are likely to be late payers, alerts businesses when reliable payers subtly start to drag out payment times, and allows businesses to add names to a “bad debt register.”

And if the government isn’t the biggest local customer in your town, you can adopt tech-focused solutions as Canberrans have done. Xero invoice reminders, for example, can be set to automatically alert debtors a few days before a bill is due, and do the same once an invoice becomes late.

E-mailed invoices that have a payment option attached — such as Stripe or Paypal — tend to get paid sooner, Xero data shows. And the power of Xero platform is augmented by over 600 third-party apps that can provide novel solutions to getting paid.

Together, these approaches may help all Australia approach the admirable payment times of its two smallest states, which point the way forward in 2018 for small businesses.