Late payments add to woes of UK’s small businesses
SMALL businesses in the UK are struggling with late payments, with just 51 per cent of invoices paid on time last year.
According to research from cloud accountancy firm FreeAgent, businesses in Sheffield are the worst affected, with just 24 per cent of invoices paid on time. Manchester is the best place to get paid, with 75 per cent of invoices paid on time last year. The problem is particularly bad among the UK’s smallest businesses, FreeAgent has claimed.
“We know that late payment is a huge issue for the UK economy, but our research shows just how widespread it is for the freelance and micro-business sector,” said Ed Molyneux, chief executive and co-founder of FreeAgent. “We found that just half of the invoices sent by micro-businesses across the UK get paid late, while there are certain hotspots where the problem is even more prevalent. And this isn’t just clients taking an extra week or two to pay – it also includes the chronic late payers who sit on invoices for months, as well as those who just don’t pay at all.
“Micro-business owners need to get paid promptly to keep their cash flow healthy and most don’t have the luxury of being able to absorb a late – or non – payment in their accounts. We need to see a complete cultural shift when it comes to paying invoices, so that these types of smaller businesses are not put at risk.”
The new data highlights the major funding issues experienced by the SME sector, which is increasingly turning towards alternative finance in an effort to plug gaps in funding and invest in business growth.
Earlier this month, a study by Amicus Commercial Finance found that three quarters of SMEs are forced to write off unpaid debts, with the average business losing £11,700 a year as a result.
FreeAgent’s Molyneux welcomed new government initiatives to improve conditions for small businesses by hiring a small business commissioner and opening a consultation into late payments.
“It’s certainly good news that the government recognises the late payment problem and is consulting over the appointment of a small business commissioner to tackle the issue,” added Molyneux. “However, I fear that whoever is appointed will have limited power to actually punish companies who routinely pay late, aside from just naming and shaming them.”
