Late payments have become a growing issue for Small and Medium-sized Enterprises (SMEs) in the UK, with outstanding payments significantly impacting cash flow and business growth. According to Aldermore’s recent SME Growth Index, late payments have increased by 48%, totalling £348 billion. This article explores the scale of this problem, its impact on SMEs, and possible solutions.
The Scale of the Problem
The report highlights that over 3.6 million SMEs face outstanding late payments, with an average of £96,772 owed per business—an increase of 41% from the previous year. SMEs now spend an average of 13 hours chasing payments, a significant rise from the nine hours spent last year.
The Impact on SMEs
Late payments have a cascading effect, with 38% of SMEs struggling to cover essential costs and 36% unable to pay their suppliers on time. Additionally:
- 31% delay investments due to cash flow issues.
- 30% miss growth opportunities.
- 24% feel they lose a competitive edge due to financial constraints.
Reasons Behind Late Payments
The rise in late payments can be attributed to various factors, such as economic uncertainty, supply chain disruptions, and changing payment behaviours. These delays force SMEs to divert valuable time and resources away from core business activities, hindering their growth and sustainability.
Possible Solutions
Ross McFarlane from Aldermore emphasises the need for a culture shift where late payments are not normalised. He suggests that a more efficient payment culture and supportive government policies can significantly reduce the burden on SMEs. Implementing flexible finance solutions, such as invoice financing, can also help SMEs release cash tied up in unpaid invoices, improving their cash flow.
Conclusion
Late payments are a growing concern for SMEs, affecting their ability to invest, grow, and compete. Addressing this issue requires a collective effort from businesses, policymakers, and financial institutions to ensure SMEs receive timely payments and can focus on their growth ambitions.
If you’re a small business owner struggling with late payments, don’t let it hinder your growth. Get in touch for expert guidance on managing outstanding invoices, improving cash flow, and implementing effective payment strategies. Let’s work together to safeguard your business’s financial health and stability. Contact Ron today to take control of your finances!