Why small businesses need to face up to late payments
For a business of any size, failing to be paid for work or services can provide a number of financial difficulties.
Cash flow management becomes trickier and the business may ultimately be left facing insolvency in the severest of situations.
The latest figures from Sage UK suggest more than half of the UK’s SMEs are facing such problems, as they are all owed more than £10,000 in outstanding invoices.
Some 43% of small British businesses are even owed more than £20,000 in late payments, a contributing factor as to why many fail to survive more than five years from start-up.
A number of influencing factors are often to blame for this, among them mismanagement and even incompetence, but a lack of finances will always be one of the most significant.
The Sage study added that the UK has a late payments culture that “accentuates the critical issue of financial health for businesses”.
It is therefore of vital importance that small businesses are willing to chase up unpaid invoices and ensure they receive the required payments for their work.
UK businesses are struggling to maintain their financial health and the study suggests many firms lack the time and resources to follow up invoices properly.
Some 63% of owners revealed it was more than a month since they had last checked the health of their business’ finances, despite being aware of the need to do so.
For instance, 51% of firms said they need to identify cash flow issues at an early stage if they are to ensure growth, yet many are failing to comply even basic checks.
Although payments from invoices should be expected as a matter of course, businesses must chase for payment as a failure to do so could ultimately have very severe implications.
Maintaining cash flow is key when looking to ensure the longevity of a company, while those fearing for their future should seek insolvency advice at the first opportunity.
This should ensure a company can take appropriate actions to help better a situation, while also receiving useful information on how best to chase up late payments.
By Phil Smith
If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1144.
View all Business Insights