Approximately three quarters of small and medium-sized businesses in the UK are worried about cashflow difficulties arising from late invoice payments from customers. For some SMEs, late payments had meant they were unable to make key investments in their business and research has indicated that smaller UK companies are owed, on average, £250,000 in outstanding invoices.
The results, from a study by alternative finance specialist Time Finance, highlight one of the key headwinds facing UK SMEs amid the current economic uncertainty, with late payments being exacerbated by cashflow struggles at other businesses, arising from issues such as inflation and rising costs.
All SMEs polled in the study said that a growing number of customers had been late making payments as a result of increased overheads. 8 per cent, meanwhile said that they had been unable to afford crucial investments in their business due to the impact of late payments on working capital. Approximately a fifth said that chasing up money owed had damaged relationships with customers.
Phil Chesham, Time Finance’s managing director of invoice finance, commented: “Last year, business insolvency reached a 13-year-high with 22,000 business forces to fold. We need to understand the challenges that caused so many businesses to go under so that we can provide better support and avoid preventable insolvency for viable businesses. Rising costs are definitely a factor here, but businesses’ challenges do not begin and end with high overheads.”
“Our research found that SMEs are owed on average £250k in outstanding invoices, and it’s no surprise that this is causing repercussions. This challenge simply isn’t sustainable for businesses. Their revenue is their lifeline; it’s how they meet their overheads and realise their ambitions. Without cash in the bank, the bills aren’t paid and growth plans are put on hold and both of these are huge threats to any business.”
“Understanding the scale of late payments is essential to the service we provide at Time Finance. Invoice finance is a longstanding solution for businesses looking to build in headroom and run their business with confidence. We’ve witnessed demand significantly grow as more businesses recognise the value of this service.”
Read more about the headwinds impacting UK SMEs:
Rising debts and reduced cash flow create SME acquisition opportunities
Insolvencies on the rise at mid-sized UK SMEs
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