Revealing the impact of unpaid invoices on SMEs

Small and medium sized businesses in the UK are potentially losing thousands of pounds of resources every year as a result of unpaid invoices.

Research from MLP Law has suggested that the issue is impacting upon company cash flows and leaving some firms in difficulty.

Using figures from Bacs Payment Schemes, it is possible to see that SMEs are facing an £8.2 billion annual shortfall across the UK as a result of unpaid invoices.

According to the new research, 64% of firms surveyed revealed they were impacted by late payments which were costing them in the region of £15,000.

A further 4% said they faced shortfalls of more than £50,000 as a result of delayed payments while half of firms said they faced the issue at least once a month.

Some 52% of smaller firms even said they write off between five and ten invoices annually, citing them as ‘bad jobs’.

Of the issues that result from unpaid invoices, the most common were cash flow problems, being unable to pay employees and suppliers, and stunted growth.

Furthermore, employers also felt they lost time and resources when dealing with these issues, as well as potentially damaging their relationships with suppliers.

Having finances they are owed paid on time is essential for many businesses who operate on tight margins and with relatively low levels of finance.

In these instances a lack of payment, especially on larger deals, can place great strain on the finances of the firm, even placing them at risk of corporate insolvency if the payment is not forthcoming.

Healthy cash flows are essential for business success and smaller firms are finding it increasingly difficult to achieve this when issues exist either above or below them in the supply chain.

Legislation is in place to encourage firms to process payments on time but it would appear many firms are still facing the same old problems.

While trying to claim what is rightfully theirs, it can be difficult to do so with damaging business links or rupturing ties for future deals.

By Phil Smith

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