Is a culture of late payments undermining UK SMEs?

The latest Small Business Strategy from the Business and Trade Committee has urged the Government to address the late payment crisis that disproportionately affects smaller UK SMEs. According to this survey, businesses are currently owed an average of £66,770 in unpaid invoices, representing a 10 percent increase from the previous year.

While the survey does not provide a definitive solution, a significant 69% of respondents are advocating for stricter penalties for those who consistently pay late. Additionally, over a quarter (27%) are calling for the Government to introduce legal measures to shield them from the repercussions of late payments. Amidst all this, companies are increasingly witnessing their customers struggle to meet payment terms, often because these customers are also dealing with late payments themselves.

There are several often-overlooked negative consequences, such as the time spent pursuing customers and the need to adopt more formal collection methods, which can harm business relationships. When considering the more pressing issues where late payments jeopardise payroll, job security, and growth potential, it is alarming that nearly a quarter (24%) of businesses have halted hiring.

The situation has led many companies to shorten payment terms and impose limits on credit earlier than before, in an effort to minimise their exposure to bad debt and ensure they are prioritised when customers decide whom to pay first. The prevailing sentiment is, “at the end of the day, we are not a bank.”

Given that late payments are undermining the confidence of small businesses and stifling growth, it is not surprising that the Government has initiated groundwork for changes to the payments framework. However, this was part of last year’s consultation, and while SMEs are eager for action, we are all still awaiting policies that will provide the certainty needed for businesses to invest in their people, products, and services.

Creatively Yours Ltd helps businesses like yours succeed online through website design, website development, and our Helponomics system that offers support and training as you need it and highlights areas that could increase your sales.

For more on our thoughts please find us on our social media channels Twitter, Linked In, YouTube, Instagram or to read our previous blogs click Here
Then why not drop us a line to helping@creatively-yours.co.uk, or simply call us HERE