SMEs are owed £27k in late payments on average according to Intuit
Small and medium sized businesses (SMEs) are currently owed an average of £27,214 in late payments, according to new research from Intuit QuickBooks, as SMEs estimate one in six invoices (17%) with customers or suppliers are overdue.
And the problem is growing – more than half (52%) of SMEs agree they have been more affected by late payments in the last year. Frustratingly, the most common reason an invoice goes unpaid is because it was simply forgotten (23%) – although the supplier experiencing their own cash flow issues and not being able to pay comes in a close second (20%).
Late payments impact business owners’ wellbeing and finances
The impact of late payments on business success is so significant that two in five small business owners (41%) say there is a real risk of their business being forced to close in the next year if the same level of late payments continue. This proportion rises significantly to 53% of SMEs in London and 57% in Scotland.
For business owners, this can have a personal impact. Amongst those who have been impacted personally, 35% have been forced to dip into personal savings to keep the business afloat, while 31% have been unable to save at all. Worryingly, more than a quarter (28%) have experienced poor mental health.
Late payments also damage SMEs’ future chances of business success. Amongst those impacted, late payments have resulted in SMEs being unable to reinvest in the business (26%) or achieve their business objectives (20%). There is also a knock-on effect as 26% have not been able to pay an invoice to another small business (26%) or pay their own suppliers (25%).
At an administrative level, late payments waste time – in a typical week, SMEs spend an average of four hours chasing late payments, adding up to more than 8.5 days per year.
Helen Matthews, founder of independent paddleboarding business, SUP With Us, comments: “Cashflow is critical to me as a small, independent business, and I rely hugely on payments coming in on time. Being paid late for my services can really throw my budgeting plans into disarray, and a bad season can even impact my ability to pay my bills and rent on time. The weather-dependent nature of my business means that in a typical English summer of wind and rain my income can fluctuate, and having to chase down late payments adds to the stress of worrying about the weather and keeping my business going.
