Small Businesses Struggle with £27,000 in Outstanding Payments

Small Businesses Struggle with £27,000 in Outstanding Payments

Small businesses across the United Kingdom find themselves grappling with a significant challenge as they face an average of £27,214 in late payments. The methods employed to address these difficulties are crucial for their survival.

Late payments have reached alarming levels, causing distress for small and medium-sized enterprises (SMEs). Recent research conducted by Intuit QuickBooks reveals that, on average, SMEs are awaiting payments totalling approximately £27,000, which translates to roughly one out of every six invoices (17%) being overdue from either customers or suppliers.

A concerning 52% of SMEs report a recent worsening of the late payment issue, with detrimental effects on their businesses over the past year. The most common reason for unpaid invoices, cited by 23% of respondents, is simple forgetfulness, followed closely by supplier cash flow problems, accounting for 20% of the cases.

 

The Toll on Business Owners

Late payments not only burden business finances but also take a toll on the well-being and financial stability of business owners. An alarming 41% of small business proprietors in the UK fear that their businesses may shut down within the next year if late payments persist. The situation is even more dire in London and Scotland, where 53% and 57% respectively share these concerns.

Among those directly affected, 35% have had to dip into their personal savings to keep their businesses afloat, while 31% have been unable to save at all. Even more concerning, over a quarter (28%) have reported experiencing poor mental health as a result of these issues.

Late payments have prevented 26% of affected business owners from reinvesting in their businesses, and 20% have been unable to achieve their business objectives. Furthermore, there are cascading effects, as 26% have struggled to meet their obligations to other small businesses, and 25% have faced challenges in fulfilling their own supplier commitments.

Chasing late payments consumes valuable time, with SMEs dedicating an average of four hours per week to this task, totaling more than 8.5 days each year.

Helen Matthews, the founder of the independent paddleboarding business "SUP With Us," shares her experience:

"As a small, independent business, cash flow is critical to me, and I heavily rely on timely payments. Being paid late for my services can disrupt my budgeting plans, and a bad season can impact my ability to pay bills and rent on time.

The weather-dependent nature of my business means my income fluctuates, and chasing down late payments adds to the stress of weather uncertainty and keeping my business going."

 

Financial Management Software Offers Relief

With SMEs feeling frustrated (30%), uncomfortable (23%), and concerned about damaging client relationships (22%) when chasing late payments, solutions to alleviate or at least mitigate these inconveniences are in high demand.

Surprisingly, three out of five (60%) SMEs are not currently utilising invoice factoring companies or any form of accounting software for invoicing, which could streamline the payment process for customers and encourage quicker payments.

For those who have embraced such software, a quarter (25%) have successfully reduced the number of outstanding invoices, leading to improved cash flow (21%), while a fifth (21%) have strengthened customer relationships by eliminating the need to manually chase invoices.

Nick Williams, UK Product Director at QuickBooks, underscores the importance of addressing late payments:

"There are clear advantages to using accounting and financial management software for invoicing. Pay-enabled invoicing makes it easier for clients to pay with a simple click, and the software generates automatic reminders, eliminating the frustration and wasted time experienced by many SME owners.

Accountants and financial advisors also play a valuable role in spotting late payment trends and mitigating their impact on cash flow. This not only makes it easier for SMEs to run their business but also increases their chances of success."

 

My Business is Having Problems with Late Payments

Firstly, don't panic. There are solutions available which your business can utilise should it be struggling with late invoice payments. Get in touch with our friendly team to explore options such as invoice finance, debt recovery, or accounting software.