- Two thirds of SMEs believe UK has a culture of late payments
- Seven in 10 SMEs say they have been adversely affected by late payments
- SMEs feel forced to write off unpaid bills
Britain’s small and medium-sized enterprises are struggling to manage their businesses because customers repeatedly fail to pay their bills on time, new research from Close Brothers reveals. Two thirds of SMEs (66%) believe the UK has a culture of late payments, a survey conducted by Close Brothers shows, with SMEs often suffering disproportionately compared to larger organisations.
Close Brothers’ research provides the latest evidence that repeated efforts to tackle late payments in the UK have had little or no effect, with damaging consequences for many SMEs. Almost two-thirds of SMEs surveyed (64.5%) said late payments made it difficult for them to manage their cash flows, with firms reporting that they often had to write off as much as 50% of turnover when customers failed to pay.
Seven in 10 company chairs (70%) said their businesses had been adversely affected by late payments. Large corporate organisations are the most likely customers to pay their bills late, the survey suggested.
David Thomson of Close Brothers said that despite a concerted effort by policymakers to clamp down on late payments, SMEs continued to suffer at the hands of customers slow to settle their bills.
“Despite several initiatives aimed at tackling the UK’s late payments problem, our research shows that SMEs are still getting a raw deal, with large customers in particular failing to pay their bills on time,” David Thomson said. “The voluntary Prompt Payments Code introduced in recent times by the Government has not had the widespread impact we might have hoped for, and while plans for a Small Business Commissioner may help in time, SMEs need support now.”
Close Brothers’ research also suggests that many SMEs may need to do more to protect themselves from the late payment position. Currently, more than a third (40%) of firms say they do not have time to chase unpaid invoices, while 86% say they have not investigated services such as invoice finance, which could be used to mitigate the worst effects of late payments.
“SMEs deserve the protection of the law – and not to be exploited by larger organisations that routinely fail to make payments on time,” David Thomson of Close Brothers added. “However, it also makes sense for SMEs to do everything they possibly can to help themselves, including investigating services such as invoice finance, which can help them manage cash flow effectively in the face of a late payments problem.”