More than a third of SMES lose productivity due to late payments

Small business owners in the UK spend 10% of the average working day chasing down payments, a new study has found. This is disrupting cashflow and having an adverse effect on productivity.

The study, by cloud services provider Xero, found that the majority (52%) of small business owners said they worry about unpaid invoices. On average they have to wait an extra 14 days after due dates to actually receive payment.

More than a third (37%) of respondents said that late payments contributed to a drop in productivity. A financial loss was cited as a knock-on effect by 25% and a backlog of work was reported by 20%.

Cashflow issues can be extremely problematic for businesses of all types and can often be a contributory factor for firms that end up facing insolvency. Late problems can also have a knock-on effect further down the supply chain. The main reason given by small businesses for late payments was the fact that their own customers were themselves waiting for payments. This was cited by 32% of respondents. The next most common problem was a lack of consistency on payment terms.

The study found that the problems varied by region. London produced the most businesses affected by late payments (14%), followed by Wales (12%), Scotland (11.5%) and the North East (10%). Business owners in London spend an average of 1.5 days per month chasing late payments while those in Wales spend 1.3 days.

The most affected sectors were found to be HR (26%), followed by IT and telecoms (16%) and manufacturing and utilities (15%). HR was also the business sector that wasted the most time pursuing payments (3 days per month), followed by IT and telecoms (1.8 days) and manufacturing and utilities (1.7 days).

A study by Lloyds Bank published at the start of the year showed that SMEs in the UK were owed more than £500 billion in overdue invoices. Businesses in Sussex, Surrey, Hampshire and Dorset were owed the most in late payments with an average of £109,000 in outstanding invoices. Those in Scotland were owed the least, at an average of £79,000.

By Phil Smith

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