No sign of an end to SME late payment pain
Small and medium-sized enterprises continue to suffer from late payments from customers in huge numbers, new research from Close Brothers Invoice Finance reveals. While the number of firms experiencing significant problems has fallen over the past three years, almost a quarter are still suffering at the hands of customers who do not pay their bills on time.
The latest quarterly Close Brothers Invoice Business Barometer shows that 24.2% of SMEs now regard late payments as a problem for their business. While that is down from 33.2% in March 2015, it means one in four SMEs are still struggling to cope, despite a series of government initiatives designed to get on top of the problem.
Close Brothers’ research also suggests that the size of the late payments issue is increasing for many SMEs. In the latest Close Brothers Invoice Business Barometer, 25.2%of businesses suffering reported that they were owed more than £40k, almost twice as many as the 13.2% of SMEs suffering to this extent in March 2015. A further 33.8% were owed between £20k and £40k, up from 22.7% three years ago.
SMEs needed more help to crack down on late payments, with the issue threatening to hold back the growth prospects of many firms.
David Thomson, CEO of Close Brothers Invoice Finance said:
“Our research suggests that despite a series of efforts to combat the matter led by government and other organisations, too many SMEs still aren’t being paid on time. This is an issue causing real hardship for many firms and has negative implications for the performance of the economy as a whole.”
Close Brothers’ research also suggests that invoice finance continues to play a key role in helping SMEs unlock the value tied up in invoices issued to customers – but that more work needs to be done to prove the case for this type of alternative finance. Some 37.2% of SMEs say they would consider invoice finance, while 9.9% already use it, though these figures are down from 43.8% and 11.9% respectively in March 2015.
“Invoice finance can provide crucial funding for growing SMEs. While it provides a potential solution to late payments-related issues, the broader picture is that invoice finance offers a number of key advantages compared to funding growth from traditional sources of business support.”