Late payments are threatening the survival of British businesses. In-depth analysis by invoice finance provider, Time Finance has revealed some startling truths. Uncovering the shocking impact of late payments, analysis has found that challenges with cashflow and restricted growth ambitions were the direct effects of unpaid invoices.
For 70% of SMEs, late payments are a reoccurring issue leading to more severe consequences with over 40% worrying about their own cashflow as a result. Recent figures from the Federation of Small Businesses estimate that 50,000 businesses close each year due to late payments.
“Struggling to pay HMRC”
Time Finance found that less than one in three businesses are paid by their customers within the agreed 30 days terms. It is stated that an astonishing 70% are waiting more than 60, 90 or 120 days. For some companies, this leaves them in a crippling position with a quarter struggling to pay HMRC.
Surveying the trusted advisors of business owners, Time Finance uncovered that 42% believe that late payments from customers was one of the greatest challenges and threats hampering business success, and one in ten are concerned for anticipated insolvency as a result. Suffering customer service levels, hindered growth plans and pressure on cashflow were cited as the top three negative impacts on business growth from late payments.
As a result of customers not paying their invoices on time, almost one in three businesses also fear their relationships with customers are negatively affected due to chasing payments, whilst over one third struggle to pay their own invoices or their own employees on time.
Late Payment culture
Phil Chesham, Head of Invoice Finance at Time Finance, said: “The UK’s late payment culture is plagued by a real domino effect and can perpetuate much wider problems. There are a number of worrying things we can see in our statistics. Businesses have to spend money to make money, but how can they do this if their potential working capital is tied up in unpaid invoices? We can see businesses being held back by late payment and this then has wider consequences for the UK economy. Our economic recovery and growth relies on the recovery and growth of businesses. If one is stunted, so is the other.
“What’s more, our survey found that for many businesses chasing payments negatively impacts their relationships with their own customers and as a result almost one third struggle to pay their own invoices on time; this truly demonstrates the vicious cycle that late payments can create. Businesses must work together to ensure that tackling the culture around late payments is a business priority – as we’ve seen already with the introduction of the Prompt Payment Code, legislation alone won’t fix this.
Small Business Debt Collection efforts
Small Businesses and SME’s have been turning to Debt Collection Agencies to help combat the problem of the late payment of invoices. The UK’s Debt Collection industry helps collect hundreds of millions of pounds every year.
If your Small Business is owed money then it is essential you act quickly or become a victim of non payment. With Business insolvencies on the rise post covid, it will definitely pay for Small Businesses to act sooner rather than later. It seems illogical not to consider hiring a debt collection agency.