Late payments an issue for 80 per cent of SMEs, survey reveals

Four in five SMEs struggle with late payments – and the problem seems to be worse for mid-sized companies than for small firms, according to a new report.

In a survey by Ultimate Finance, 81 per cent of SMEs said late payments are an issue, and 51 per cent said their businesses would run more smoothly with fewer late payments.

But the problem seems to be particularly bad for medium-sized companies, as 94 per cent of organisations with more than 50 employees said late payments led to cashflow issues.

And while 82 per cent of SMEs overall have up to £25,000 in late payments, medium-sized businesses have an average of more than £30,000.

“We know that late payments can have a huge impact on small businesses. It is without a doubt one of the biggest challenges faced by UK companies,” said Anthony Persse, director of strategy at Ultimate Finance. “However, there is a deep misconception that it is an exclusively small business issue which is simply untrue.

“This is leading to rules such as late payment reporting, which is creating an ‘us and them’ situation, when we should be seeking a workable long-term solution.

“This is not just a case of the bigger boys picking on the smaller guys – cashflow and supply chain management affects every organisation, and should be tackled by the community coming together to support one another.”

While the government has taken action with legislation like payment reporting, the report’s authors said this can be “incredibly divisive” when the issues vary between businesses.

“Current methods to help aren’t doing the job,” Persse said. “Just look at the bank referral scheme which is being evaluated for effectiveness.

“The issue is that politicians keep coming up with one-size-fits-all ideas and trying to dictate to businesses. Both SMEs and corporates are full of intelligent people who understand the challenges better than anyone.

“They should be the ones to create the solution, with support from government and the wider industry – not the other way around.”

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