Examining the threat of late payments to microbusinesses

The UK’s microbusinesses are owed more than £16.9 billion in late payments according to new figures and this could be placing many of them under financial strain.


Accounting software firm Intuit Quickbooks found that a reluctance from customers to pay swiftly was driving many of these smaller businesses to take action.


Nearly a third revealed they had to take out credit or a loan to pay wages or suppliers, putting pressure on their business operations.


These impacts on cash flow were also causing staff at microbusinesses to spend an average of 19 working days a year chasing invoices – time that could be better spent on other aspects of business.


The attitudes to payments that are displayed by customers were found to be in stark contrast to business owners, as 93% claimed they are happy to pay immediately for personal purchases.


Despite this, many do not ask their customers to pay straight away. This is highlighted by the fact that 94% of those who wait up to one month to invoice said they were prepared to pay up front when acting as a consumer.


Invoicing issues


The invoicing process was found to be one of the major issues for microbusinesses – just 36% of them issue invoices via email with many still relying on traditional paper ones sent by post.


In some cases, the companies were waiting up to a month to even send them, delaying the process of payment further.


The business world can be tough for start-up firms so making the process as easy as possible should be a priority.


Given that half of start-ups were found to fail within five years during a study in late 2014, focusing on swift payment and cash flow management is needed.


Wasting time on payment issues prevents the generation of ideas, slows the design process, and impacts on development, sales and marketing activities.


Ultimately, this could place firms under extra financial pressure, yet seeking advice and assistance from an insolvency practitioner could help.


They should be able to guide business owners towards the best course of action for their start-ups, improving the chances of finding success.


Finding ways to be paid quicker as a business could be just the start.


By Phil Smith


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