SMEs confident about growth but problems with late payment of bills and invoices are increasing
SMEs are confident about growing revenue in the year ahead but face issues with paying for insurance and late payments, new research1 from the UK’s leading insurance premium finance company, Premium Credit, shows.
Premium Credit’s Insurance Index, which monitors insurance buying and how it is financed, found 83% of SMEs expect revenue to rise over the next 12 months with more than half (53%) predicting increases of up to 10%.
But problems with late payments of bills and invoices are increasing and restraining plans to grow – around two out of five (38%) say late payment has become more of a problem in the past year. Just 16% say issues with late payment have improved over the period.
There is some relief on the way with a new2 60-day cap on payment terms for all large firms paying smaller suppliers and mandatory interest for late payments of 8% above the Bank of England base rate for all commercial contracts.
The main driver of SME optimism on revenues is their focus on expansion – 39% say they plan to launch new products and services while 35% plan to expand into new markets. Around a third (29%) say they have successfully cut costs while 27% are hopeful cost of living challenges will subside over the next 12 months.
Domestic and global economic challenges are the biggest reason for firms expecting their businesses to shrink in the year ahead – nearly a third (31%) expect the UK to contract while 24% believe the economy will stagnate. Around 26% believe the global economy will be volatile and a fifth blame Government tax rises such as increases in employers’ National Insurance.
Owen Thomas, chief sales officer, at Premium Credit commented: “Many SMEs are optimistic about the year ahead and focused on overcoming the challenges from the UK and global economies as well as tax increases.
“However cashflow clearly remains a major concern and a constraint on growth, with late payment of bills a growing issue that underlines the need for solutions that help firms manage their cashflow.”