Late payment victims have almost one-in-six invoices paid late in last six months
UK business victims of late payment saw almost one-in-six (15%) of their invoices paid late in the last six months, according to research by insolvency trade body R3.
Earlier research by R3 found that late payment is a primary or major factor in one-in-five corporate insolvencies.
The research also found that half (49%*) of UK businesses had invoices paid late by customers in the last six months.
Andrew Tate, R3 vice-president, said: “Late payment puts unnecessary strain on a business cash flow, increasing the risk of insolvency. Despite government guidelines and business campaigns, late payment still remains all too common. Businesses know how much it costs others to chase down debts, and feel they can still get away with it.
“When a business enters insolvency, customers can see this as an opportunity to further delay payments or avoid payment altogether. Doubts over cash flow caused by late payment can make it impossible to continue to trade a business in administration until a buyer is found.
“A year ago, the FSB found half of its members had been paid late in the previous year. Although the government is keen to make an impact on late payment, progress has been disappointingly slow over 2014 and 2015 with the number of businesses affected by late payment stubbornly high.
John Allan, national chairman of the Federation of Small Businesses (FSB), said: “The weight of evidence showing the damage poor payment practices are having on the UK economy grows greater each day with the amount owed in late payments now at £41.5bn. Once again we find it is sole traders and smaller firms which are facing the brunt of late payments, and this is putting viable businesses at risk of closure.
“Addressing the UK’s poor payment culture – particularly among large companies towards their smaller suppliers – must be a top priority for the new government. Small businesses see progress on payment practices as a key benchmark of success for the new administration.”
Proportion of UK businesses reporting late payment in last six months, by proportion of invoices paid late**
Sole trader late payment victims are most likely to have most invoices paid late, seeing an average of 17.3% invoices being paid late in the last six months. Late payment victims employing over 250 people only had an average 12.3% of invoices paid late.
7% of sole traders said that between 41-50% of their invoices had been paid late, compared to just 1% of companies employing over 250 people.
Andrew said: “It’s the smallest companies that bear the brunt of late payment. The consequences of late payments are magnified for smaller companies too: one invoice being paid late will have a disproportionate impact on a very small company compared to a larger counterpart.”
Average proportion of invoices paid late, by size of company with late payments
*47% report no late payments; 4% don’t know
**Total doesn’t equal 100% due to rounding