Almost 1 in 5 invoices issued by small and medium-sized businesses in the UK are paid late, according to research.
On behalf of Sage, Plum Consulting analysed a survey of over 3,000 companies, across 11 countries.
Of the countries surveyed, UK companies were shown to have one of the highest rates of late payment, totalling £112 billion per year.
This was found to have significant impacts on productivity, with an average of 15 days spent chasing payments.
Over half of those surveyed in the UK said this causes negative effects for their business, impacting on their ability to pay suppliers (26%), invest (25%), and give employees an annual bonus (22%).
The report called for a change in the business culture that sees late payments as acceptable, and increased awareness of the impacts they can have.
Use of automation was also encouraged, as a way of chasing payments without putting the client relationship under strain.
Quote from Nigel Holland:
“The consequences that can occur due to late payments need to be addressed in order to help out small businesses in times like this. This is because businesses are dedicating their time to provide a service to their clients and without a payment the businesses are effectively becoming less efficient and could be running at a loss.
In fact, some small businesses are in such a detrimental position due to not being paid on time, it is causing them to go into their overdraft and some to even close down. I believe the government should provide more help and support to SMEs so that they can obtain back the money they are owed in a timely fashion and maintain the security and success of their business.
Not only are the late payments affecting the small businesses themselves, but it is essentially putting their suppliers and staff at a disadvantage too, this is because of the domino effect.
Due to SME’s cash flow being negatively affected, it can make payments to their suppliers a struggle as revenue and working capital gets depleted. This could potentially damage the relationships between the small businesses and their suppliers.
As well as this, staff can become demotivated in the workplace if they are paid late, or if there is less chance for them to gain an annual bonus. The reason being is that staff may feel as if there is no point in them trying to enhance their productivity in the workplace. This is because they do not have a reward to look forward to. All in all, this will negatively affect the running of the business and could cause a productivity and efficiency drop.”