SMEs face rising costs of late payments

The cost for SMEs to chase outstanding and late invoices is in the billions of pounds according to data from Pay.UK and QlikBooks. Pay.UK have published a figure of £4.4 billion, while QlickBooks reports a higher figure of £6.3 billion to follow up and manage late payments.

 According to the data published, small businesses are using 56.4 million hours to chase overdue payments and 22% spend more than £500 every month to keep on top of their accounts receivable.

The value of unpaid invoices increased by £10.4 million reaching £23.4 billion in 2019 with the average outstanding per business increasing from £17,000 to £25,000. As a result, some (24%) business owners have reduced their own pay to help sustain their cashflow.

Just under two thirds of businesses report late payments are having a negative impact on their business, with 35% having to use overdrafts to maintain their cashflow and 24% holding off payments to their own suppliers. 12% of small businesses who are experiencing late payments struggle to pay their staff on time and 10% rely on invoice finance to borrow cash to run their business.

However, while SMEs are feeling the pain of delay, it is in fact eight out of ten late payments for SMEs are owed to them by other SMEs.

Paul Horlock, Pay.UK CEO said “It is concerning that so many smaller businesses are struggling because of late payments in 2019, especially as there are so many ways they can now get paid. Offering customers a choice of payment or automated options can help remove barriers to make sure a bill is settled on time.”

Businesses who are looking at options to improve their cashflow could consider exploring invoice finance, business credit cards or review their business bank account.