31% of SMEs have experienced late payments

Latest research conducted by Hitachi Capital UK has revealed that late payments continue to have a detrimental effect on UK businesses, with over a third of companies reporting losses of at least £10k in the last year due to not being paid on time. 

The research also indicated that the epidemic of late payment culture is having a impact on the long-term health of the UK economy. It is estimated that the cost to UK SMEs to be at least £51.5 billion, in the previous 12 months. Late payment results in poor cash flow which has an almost immediate impact on growth and productivity.

Over  27% of SMEs report that profits have reduced considerably which they attribute to late payments, and a further worrying statistic that shows 12% have been unable to pay staff salaries. This means that unacceptable figure of 1.95m UK employees have been left empty-handed on payday.

40% of business owners have admitted to having to use their own money to prop up their business as a result of poor cash flow. Others have taken out expensive business loans to bridge the gap whilst waiting for payment to come in. The alternative is to shut up shop.

Whilst pressure is applied to the government by business bodies such as The Federation of Small Businesses, the report highlighted the need for UK businesses to be more proactive. SMEs should take steps to maintain cash flow and mitigate damage caused by late paying customers. This can be done by applying greater due diligence on who they are working with, having firmer terms and conditions and reacting quickly when payment fails to come in on time. The longer an invoice is overdue, the harder it is to recover is the old adage.

Robert Gordon, CEO of Hitachi Capital UK, said: “An imbalance of power between clients and suppliers, often driven by larger players abusing their position, has led to a widespread late payment culture that is damaging UK SMEs. As our research has shown, if we let this go unchecked, huge numbers of businesses will continue to experience cash flow pressures at a time of wider economic uncertainty.

“This has ramifications not only for SMEs, but for entire supply chains and a fair, competitive and supportive business environment is critical for the country’s wider economic success. It’s imperative that we not only acknowledge this issue and crack down on late payments, but also take practical steps to ensure businesses are given the required support and penalties are put in place for the worst offenders.”