Survey shows 1 in 2 Small Businesses struggling with late payments

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small businesses struggling with late payment

The latest survey and research undertaken the the Federation of Small Businesses shows late payment is worse than ever. A survey of 1,300 Small Businesses and sole traders showed that half of SME’s are dealing with late payment for the quarter April to June 2022.

Of the businesses surveyed, 1 in 5 said the issue of small business late payment is worsening due to chaotic economic conditions. High growth specialists for startup businesses Trachet say its a critical time for start-ups and SME’s to get stricter with their payment terms to maximise cash flow.

Institute of Directors poll predicts bleak outlook

According to the Institute of Directors’ latest poll of business chiefs, business leaders have become weary about their organisation’s growth,. More than half state that with soaring energy costs and skills shortages give projections of a rocky road ahead. Serving as testament to this, UK business investment intentions have been in decline since the beginning of the year,. This has been undermining efforts to lift productivity in the UK. Trachet is reported by London Loves Business website as saying many British startups are seeing VC investment pull back steadily, this alongside the rising cash flow threat caused by late payments has created a moment of uncertainty for these organisations.

Trachet highlights the importance of cash management, at a moment where acquiring funding is becoming increasingly difficult. Ensuring supplier payment terms are favourable is crucial to accurate cash flow projections, enabling an organisation to manage growth, taxes and keep the business running. Having an accurate depiction of cash flow is also essential to future fundraising rounds, as numbers increasingly prevail over narrative when looking for capital. Payment arrangements can be renegotiated when reviewing prices and renovating contracts, using an advisor at this point is critical as few businesses are aware of the different policies that protect small businesses from late payments.

As UK start-ups at many stages are experiencing an absence of funding, navigating a potential M&A has become their only alternative, particularly for those with a high cash burn. It usually takes at least 3-6 months to execute an M&A, from devising a step-by-step plan, identifying the right companies, and closing the deal. When there’s a forecasted cash flow issue this is the window for start-ups to develop the best possible terms for an exit strategy.

Business advisor, Claire Trachet, CEO & Founder of Trachet advises on the importance of cash management amidst current macroeconomic conditions: “We’re seeing a combination of both late and early-stage startups becoming compromised as the well of easy and cheap money has dried up. My best piece of advice in these challenging times is to assess end goals for organisations looking to extend the runway – perhaps in light of what’s happening in the capital markets, a better course of action may be to consider an exit, or conversely there may be another company worth acquiring to fortify and expand existing operations.

Late payment is the silent killer of Business owners Dreams

Small Business Debt Collection has a critical role to play in combatting the problem say some experts. Chris Spencer of leading Business Debt Collection firm Federal Management said “Small Business late payment is the silent killer of business owners dreams. The turbulent economy is meaning that some unscrupulous business owners are choosing to avoid paying invoices on time and very often, not at all”

It has been said in the past that expedient debt collection action could have saved thousands of SME’s.

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