94% of mid-sized firms report late payment issues
Late payments are not just impacting on small businesses, as new research highlights that 94% of medium-sized firms are also facing issues.
According to Ultimate Finance, firms employing 50 people or more report that they are facing significant cash flow problems as a result.
The study, done in partnership with BDRC Continental, found that 81% of SMEs view late payments as a problem, while half state business practices would run more smoothly if they didn’t have to constantly deal with the issues that arise from late payments.
More than four in five SMEs revealed they are owed up to £25,000 in late payments, while that figure increases to an average of £30,000 for medium-sized firms.
The Government has acted to address the issue with new legislation that requires larger companies to publically detail their payment terms yet late payments continue to be a problem.
Director of Strategy at Ultimate Finance, Anthony Persse, described the widespread issue as “one of the biggest challenges faced by UK companies”.
“There is a deep misconception that it is an exclusively small business issue which is simply untrue,” he added.
He also said that all businesses are having to manage cash flow and their supply chains effectively and that it is not a case of “the bigger boys picking on the smaller guys” which the legislation seems to suggest.
According to BACS, 38% of small firms have also questioned whether the legislation will be helpful for them and have raised concerns over how it may impact business relations.
“Many SMEs have significant late payment debt and it’s clear that something must be done,” Persse added.
The finance firm has suggested that businesses should have a greater role in finding the solution to the issue of late payments, with further support from the government.
If a business is unable to solve its cash flow issues, bad debts can mount and the firm may even require measures frim the Insolvency Act to get the best outcomes.
For a firm struggling to survive, administration could be required to rescue the company as a going concern or to achieve the best results for creditors.
By Phil Smith