£50 billion in late payments being chased by SMEs in the UK
13 January 2020
1,000 CEOS, founders, directors and senior management staff at SMEs have been surveyed by the financial services company, Tide, which highlighted that small and medium-sized British businesses are chasing payments that total over £50 billion.
Along with the cost of the actual outstanding payments, companies need to consider how much time is dedicated to chasing outstanding invoices, as this will also cost them money as they need to factor in paying their employees for their time. The research showed that the average SME has five outstanding invoices at any given point, which employees are spending 1.5 hours per day chasing, and an average figure of £85,000 is the amount owed. Businesses who employ between ten and 50 staff are owed approximately £13,000, spread over an average of 7.5 invoices.
The issue also affects those who are self-employed, who ordinarily have an average of four outstanding invoices, which total a figure of roughly £1,000.
The severity of the problem varies considerably based on location, with London claiming they struggle the most in relation to late payments, and have an average of seven invoices outstanding, which takes two hours a day to follow up. This was closely followed by Scotland, who reported six unpaid invoices, taking an hour and a quarter to track down each day. Those in the south west suffered least with an average of three unpaid invoices.
The issue is so substantial that 50,000 SMEs were forced to close their business due to the number of late payments in 2016.
Tide’s CEO, Oliver Prill, commented:
“It has been known for a while now that late payments are crippling SMEs, with the government having tried a number of times to address the issue. It is however shocking to see exactly how much time SMEs, and particularly the self-employed, are wasting by having to chase clients to pay promptly. Cash flow is crucial for SMEs, and just a few late payments can tip them into the danger of becoming insolvent.
In addition to wasting time chasing payments, decision-makers and senior leaders at SMEs are spending 30% of their working day (12 hours per week) on unprofitable admin tasks, based on the average weekly hours worked. This is equal to almost two and a half hours each day (30%) – totalling 12 hours per week spent on tasks such as banking, expense management, book-keeping and accountancy. 83% say they regularly work outside of ‘normal’ office hours, with more than half (55%) working weekends and 2 in 5 working on bank holidays (40%).”