More than a quarter of SMEs in the UK have seen an increase in late payments due to the rise in the cost of living. New research from Barclays highlighted that 26% of those businesses that responded had noticed an impact on their payments.
The increase in late payments is having an impact on businesses paying their own suppliers. 16% of SMEs overall have had difficulties with their own payments. This increases to 33% of companies within the manufacturing and construction & real estate industries.
Difficulties of unpaid invoices
The main problems of late payments for businesses are cashflow instability and business failure. It also causes problems for companies in hiring new employees or investing in the business. 10% of businesses said that the money owed in late payments could be used to increase recruitment, with 12% agreeing that it would enable them to expand services or products.
Business owners are also seeing an impact on their health due to late payments. 26% said that they have suffered from anxiety or seen a negative effect on their wellbeing. Additionally, 21% of business owners have had sleepless nights from chasing unpaid invoices.
If a customer was known for paying late it would put 58% of businesses off working with them.
Small Business Commissioner, Liz Barclay, said: “It is utterly distressing to see that late payments for some are becoming more frequent. However, given the cost of living crisis, increases in material costs and staff wages, it isn’t surprising as many firms are delaying payments until they themselves are paid.
“The biggest companies with the deepest pockets must realise that if they delay payments or offer unfair extended payment terms the whole of their supply chain suffers. The talented people who keep them supplied with goods and services from which they make their money will go to the wall and struggle with mental health issues.”
Hannah Bernard, Head of Business Banking at Barclays, said: “The past two years have been some of the most challenging in living memory for businesses. Along with consumers, SMEs now face the bite of the cost of living crisis.
“It’s more important than ever for businesses to have confidence in their cash flow, which is why we’re working with the Small Business Commissioner to continue our call for higher standards, and urging larger businesses to make good on their commitments and pay their suppliers on time.
“We need to put an end to late payments to unlock the full potential of the nation’s hard working businesses. Many could use the money owed in late payments to reinvest and grow, generating a boost for the wider economy.”
Managing the increase in late payments
It’s important for businesses to keep a close eye on unpaid invoices in order to manage their own cashflow. Chasing up late payments quickly is essential to prevent the situation becoming worse.
Late payment interest and compensation can be added to invoices when they are not paid on time. Businesses can also check the payment terms that companies have committed to if they are signed up to the Prompt Payment Code (PPC).
At CEA Limited we work with businesses of all sizes to help recover their late payments and improve their cashflow. If you have problems with unpaid invoices, contact our debt collection team today to discuss your situation.
More information
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