Two thirds of businesses hit by late payments
Under a third of the UK’s businesses are paid within the terms of contracts, according to new research from Hitachi Capital Business Finance.
Some 63% of firms reported late payment issues, with the risks exacerbated when the companies were smaller.
Only 30% of firms said they has all of their invoices paid in a timely fashion, while nearly half said it took at least a week to receive payment.
Worse still, 46% reported that invoices had gone a month overdue, with 35% saying it had taken even longer to have invoices settled in full.
Businesses with an annual turnover of £1 million or less were deemed to be most at risk of non‐ payment, which could have a serious knock‐in effect on cash flow.
For firms of this size, 26% were regularly paid more than one month late, while 25% were likely to have bad debts on the back of invoice non‐payment.
Around 20% of small businesses revealed that they expect 20% of their invoices to go unpaid, with firms in the manufacturing and legal sectors worst affected.
The opposite could be said for the hospitality and agricultural sectors, where levels of late payment were at their lowest.
Late payment issues were most prevalent among small firms in London (70%), as well as in the South East and the East and West Midlands (all 67%).
Businesses in London and the North West were also most likely to be impacted by non‐payment issues, with 36% and 33% of firms in those regions affected.
The study suggests that late payments directly threatens the ability of small businesses to be successful, and that as much as £50 billion could be locked up in late payments.
Late payments do not just directly influence cash flow either, as valuable time and effort is required from employees to chase payments too – resources that could be better used focusing on growth.
Ultimately, continual financial issues may drive a business towards insolvency methodology or restructuring in order to keep trading.
The nature of the financial problems being faced will influence what options are available, while corporate advisory services can help to manage a crisis if required.
By Phil Smith