Small Business Late Payment a growing issue for 1 in 5 SMEs

small business chasing late payments

New research from Premium Credit has shown that late payment issues are easing for SMEs but still remain a concern.

Its Insurance Index, which monitors insurance buying and how it is financed, found one in five (20%) of firms reporting a growing problem with late payment of bills with 5% warning the issue has become much worse.

That is substantially down on the 28% of firms saying late payment problems had worsened in the past 12 months which included 7% saying it had become much worse when the Insurance Index last reported.  It is also lower than the 24% saying payment delays had worsened in the previous 12 months in the 2022 Insurance Index3 .

More than half (52%) of SME owners and managers questioned this year say the late payment issue has remained the same for them in the past 12 months which compares with 50% last year.

Managing cashflow

One method being used to manage cashflow at SMEs identified by the study is a growing switch to paying for insurance monthly instead of in a one-off payment. Around 15% of SMEs have switched to monthly payments for insurance compared with 11% who have switched to paying in a lump sum.

SMEs have also run down savings with 28% saying the amount of savings they have has fallen since the start of the cost of living crisis including 9% who say their cash savings have dropped dramatically. Around one in five (20%) have increased savings over the same period.

Owen Thomas, Chief Sales Officer at Premium Credit, said “It is encouraging to see that the issue of late payment of invoices is easing somewhat for some SMEs but despite that, it still has a major impact on cashflow and business operations.”

Small Business Late Payment – What can be done?

The issue of small business  late payment is a major concern for small and medium-sized enterprises (SMEs) in the UK. With many businesses struggling to stay afloat during the cost of living crisis, cashflow has become an even more crucial factor for their survival.

Moreover, the impact of late payments goes beyond just managing expenses and paying bills. It can also have a significant effect on business operations as well as employee morale. The stress and uncertainty caused by not receiving payments on time can lead to reduced productivity and even affect the mental well-being of employees. This is why it is important for SMEs to have a solid cashflow management strategy in place.

One way for SMEs to improve their cashflow is by working with a professional debt collection agency. There are a number of solutions for B2B Debt Collection services who specialise in Small Business Late payment and can help Small Businesses get their invoices paid.

Another option is invoice financing. This allows businesses to receive early payment on their outstanding invoices from a finance provider, instead of waiting for their clients to pay them. It provides businesses with immediate access to cash, enabling them to cover expenses and invest in growth opportunities without having to worry about late payments.

Aside from these solutions, it’s also important for SMEs to have a budget and stick to it. By carefully tracking expenses and setting financial goals, businesses can ensure that their spending is in line with their income. This will help prevent overspending and keep cashflow under control.

In addition, implementing efficient invoicing processes and regularly following up on outstanding payments can also improve cashflow. Setting clear payment terms and offering incentives for early payment can encourage clients to pay on time or even ahead of schedule.

For long-term cashflow management, UK Business Experts advise it’s crucial for SMEs to also focus on maintaining good relationships with customers. This is proven to help prevent small business late payment.



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