Late payments for UK SMEs – the facts and figures
Late payments have long been a major challenge for small and medium-sized enterprises (SMEs) in the UK.
Late payments have long been a major challenge for small and medium-sized enterprises (SMEs) in the UK. With cash flow often already tight, delayed payments can have a significant impact on the financial health and operational stability of these businesses. Recent statistics highlight the scale of the issue, its consequences, and how SMEs can better protect themselves against bad debt.
Rising late payments: the growing burden for SMEs
According to recent data, over half (55%) of UK SMEs reported an increase in late payments during the second half of 2023. This statistic underscores a worsening trend that many small business owners will find familiar. The late payment culture is not a new phenomenon, but it has become more acute, creating further strain on already stretched financial resources.
The financial impact of late payments: a look at the numbers
One particularly troubling statistic is that 27% of UK SMEs - representing approximately 2 million small businesses - are owed between £5,000 and £20,000 in unpaid invoices. These are not insignificant amounts for companies operating on tight budgets; such debts can be the difference between survival and closure.
The impact of these outstanding payments reverberates throughout the supply chain, affecting business operations, staffing decisions, and the ability to plan for future investments.
Time and resources wasted: chasing payments
One of the hidden costs of late payments is the time spent pursuing them. Around 31% of businesses admit to spending between 21 and 30 hours per month chasing customers for overdue payments. This equates to nearly a full workweek each month dedicated to an unproductive task.
The time spent managing and chasing payments is time taken away from core business activities like serving customers, developing new products, or expanding the business.
The broader consequences: cash flow problems and business failures
Cash flow is the lifeblood of any business, and when it's interrupted, the consequences can be dire. The UK's Small Business Commissioner reports that 20% of small businesses have experienced cash flow problems due to late payments. Cash flow challenges can lead to an inability to pay suppliers, meet payroll, or cover essential expenses.
Protecting your business: how Trade Credit Insurance can help
For SMEs, the unpredictability of late payments makes it crucial to have strategies in place to mitigate risks. One effective solution is trade credit insurance. This type of insurance offers a safety net for businesses, protecting them from bad debt and providing the support needed to navigate an unpredictable payment landscape. Here’s how trade credit insurance can make a difference:
- Safeguarding Against Bad Debt in the event of non-payment.
- Establishing Credit Limits for Customers
- Running Credit Risk Checks
- Risk Assessment Before Trade
- Avoiding Foreseeable Losses
Navigating late payments with confidence
Late payments are an unavoidable reality for many UK SMEs, but they don’t have to be a death sentence for a business. By understanding the scale of the problem and taking proactive measures to protect against bad debt, small businesses can maintain healthier cash flow and ensure that their focus remains on growth rather than debt recovery.
Tools like trade credit insurance provide a robust way to manage risk, allowing SMEs to trade confidently and make informed decisions. To find out more about Trade Credit Insurance, please contact us on 0330 058 9863 or using the button below.
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