UK SMEs are struggling as late payments have doubled within the last year, according to a new MarketFinance survey.
The data shows that late payments doubled from 12 days in 2018 to 23 days in 2019. In addition, 39% of invoices issued in 2019 were paid late. This, however, is an improvement from 2018 when 43% of invoices were paid late.
Another key finding is that the invoices that were paid laid often were larger in value than those paid on time.
Bilal Mahmood, External Relations Director at MarketFinance, said: “It’s great to see that fewer invoices were paid late in 2019 but worryingly, those that were paid late took twice as long as in 2018, up from 12 days to 23 days. Late payment practices harm business cash flow, hampers investment and, in extreme cases, can risk business solvency.
“Separate research we’ve conducted highlighted that 87% of businesses are prevented from taking on more orders because of the cashflow constraint owing to late payments. Overall it seems who you are doing business with and where they are based is important to know for a small business if they need to forecast cashflow.
Mahmood also said more needs to be done to create awareness of the issue. However, until that happens, Mahmood advises SMEs to fight back against the negative impact of late payments by holding discussions with debtors and imposing sanctions.
Professional and legal services businesses suffered the most with late payment in 2019. For instance, 70% of invoices were paid late, up from 30% in 2018. Manufacturers (57%), retailers (49%) and creative industries businesses were also largely impacted by late payments.
Late payments improved for companies working in the utilities and energy sector, with 34% of invoices being paid late in 2019 compared to 66% in 2018.
To carry out this research, MarketFinance analysed late payment trends between 2013 and 2019, looking at over 100,000 invoices.
Mahmood added: “SMEs owners have come to expect long payment terms but late payments are inexcusable. For every day an invoice is late, it’s more time spent chasing payment. This means less time for business owners to focus on growing their business, coming up with innovative ideas and hiring more people, or just paying their staff and bills. Things need to change quickly.”
“We want the UK to be the best place in the world to start and grow a business, but the UK’s small-to-medium-sized businesses are hampered by overdue payments. Such unfair payment practices impact a business’ ability to invest in growth and have no place in an economy that works for everyone.”