SMEs face financial turmoil as half of invoices are overdue

Around a quarter of the UK’s small and medium-sized businesses could be at risk of financial downfall due to large number of unpaid invoices.

Research from Tungsten Corporation suggests that the average SME is owned nearly £41,000 in unpaid invoices, of which nearly £21,000 is overdue.

Should these levels of late payment exist across the entirety of the small business sector, then the UK’s SMEs could be owed as much as £212 billion.

The high figures showcase the difficulties that many of the nation’s businesses face on a regular basis, as late payments can make cash flow management a problematic process.

A lack of payment could be the difference between a successful month and a failing one for companies with low finances. It could potentially even leave a business facing insolvency in a worst case scenario.

Some 23% of 1,000 firms questioned said that late payments has left them at risk of closure while businesses in the IT sector were most adversely affected – 32% were impacted financially as a result of unpaid invoices.

A third of businesses revealed there was no clear pattern among companies that do not pay on time, although 22% added that the majority of late payments came from large firms.

A further 11% blamed medium-sized firms while 8% said those in the public sector had a habit of not fulfilling invoices at the time requested.

The results would seem to suggest that the issue is commonplace across the world of business, although it also makes the problem more difficult to manage and solve.

Delays to payment can happen for a wide variety of reasons, although technology is slowly starting to speed up the process.

However, the study found that only a quarter of small businesses were using electronic processes, meaning more can be done.

The key for firms is to adopt approaches which can be easily used, as simplicity should help improve payment procedures.

By Phil Smith

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