Late payments are ‘endemic’ to UK business landscape

A new study claims that late payments to SMEs are endemic in the UK business ecosystem.

According to the Bibby SME Confidence Tracker for Q1 2016, 44% of SMEs are forced to wait for longer than 30 days for payments. The worst culprits are large corporate customers and clients, while the public sector is the most likely to pay promptly.

More than one in 10 SMEs described late payments from customers as their biggest challenge right now. Late payments can have a severe effect on a business’ cash-flow and could leave some facing liquidation if they are unable to source the support and finance required.

Large corporate businesses were reported as being the most likely to make late payments, with nearly half (43%) of SMEs saying big business clients were late payers. Nearly a third (28%) said small businesses paid late and 27% reported medium-sized businesses as late payers.

Some 19% had experienced late payments from sole traders and, despite recent reports to the contrary, the public sector appears to have improved its payment times. Only 13% of SMEs surveyed said that public sector clients paid late.

Late payments also have a knock-on effect up and down the supply chain. The top reason given to SMEs for late payments was that the client was experiencing cash-flow problems due to waiting for payment from its own customers.

Other reasons given were cash-flow issues due to waiting for additional funding to be released by a third party and the claim that late payment is now the norm within the applicable industry. Another reason for late payments given to SMEs was a delay while querying the quality of goods or services provided and querying the costs charged.

44% of SMEs faced late payments in the UK as a whole but some areas were more badly affected than others. The East Midlands was the worst region for late payments in the first quarter of 2016, with 51% of SMEs reporting problems. The North West was second with 49% followed by the West Midlands (47%), the North East (46%) and Wales (45%).

By Phil Smith

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