Six in 10 invoices issued by small and medium sized enterprises (SMEs) are paid late, according to research by Amicus Commercial Finance.
A poll by the provider found 61 per cent of bills issued by UK SMEs remain unpaid after the debtor period, with 16 per cent still not settled after 90 days and of these, almost half are still awaiting payment after six months.
The survey found 70 per cent of firms rely on getting paid on time to avoid a shortage of working capital and one in 10 fear that they will go bust as a result of late payments.
Medium-sized businesses with between 50 and 249 employees were the worst affected by delayed payments with a quarter of invoices remaining unpaid after their debtor period or not at all.
John Wilde, managing director of Amicus Commercial Finance, said the study underlines the extent to which SMEs often rely on a small number of customers and delayed payments from these can have serious consequences.
He said an SME’s top three customers on average account for almost half of their overall revenue.
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As well as the financial implications, Amicus Commercial Finance examined the psychological impact on business owners caused by lengthy payment delays. 28 per cent said it has caused them considerable stress and anxiety and a fifth reported that their frustration had turned into anger.
In order to mitigate the impact of late payments, eight per cent of firms said they currently use invoice finance and an additional 19 per cent of business owners plan to use it in future, including 11 per cent in the next 12 months.
“Invoice payment terms are all too often ignored and for small firms this can put their cashflow under intolerable pressure, particularly when late payers are also large customers,” said Wilde. “For business owners with healthy sales, the frustration of being forced to take out business loans or extend their overdraft to avoid becoming insolvent can be overwhelming.
“Given this, it’s understandable that small firms are increasingly turning to invoice finance as a way of converting unpaid debts into instant working capital.”