SMEs face £50,000 annual shortfalls due to late payments
22nd May 2015 | News
Almost two-thirds (64 per cent) of UK SMEs are owed up to £15,000 a year in overdue invoices, according to new research.
The study by law firm, MLP Law found that four per cent of small and medium-sized business owners experience deficits of more than £50,000 a year due to unpaid bills.
As a whole, the SME sector reportedly faces annual shortfalls approaching £8.2bn as a direct result of late payments, according to figures from the Bacs Payment Schemes.
Unpaid invoices remain a common problem with almost half of small firms experiencing unpaid invoices at least once a month.
Meanwhile, 52 per cent of small business owners confirmed they are forced to write off up to ten invoices annually simply as a “bad job”.
The survey revealed that cash flow problems (84 per cent) remain the most common reason for late payments, followed by an inability to pay employees and suppliers (36 per cent), strained relationships with suppliers (21 per cent) and lower than anticipated business growth (12 per cent).
Tristan Duncan, partner, MLP Law, said: “The old ‘cash is king’ notion couldn’t ring truer here.
“SMEs are the backbone of the UK’s economy and cash flow is clearly a huge issue for them. A healthy cash flow is the key to a successful business and when it slows, businesses can fail.
“While there is legislation in place which actually helps businesses to be paid on time, sadly many SMEs still face huge problems when trying to reclaim what is rightfully theirs, especially from large corporates.”
The vast majority (68 per cent) of small firms don’t seek legal advice to resolve their cash flow issues with almost half (48 per cent) of SME owners believing it to be too expensive.
Meanwhile a third (34 per cent) of SMEs claimed they simply didn’t have the time to pursue unpaid invoices.