More than half of small and medium-sized enterprises (SMEs) believe that late payments threaten the survival of their business, a major new study has revealed.
The finding forms part of accountancy software Xero’s new study, Business Rewired.
The report, which analyses the rapidly changing landscape facing small businesses, shows that some 54 per cent of SME leaders are gravely concerned about the poor payment culture.
According to the paper, the average small business is owed more than £23,000 through unpaid invoices and is forced to wait an average of 14 days after agreed terms to be paid.
Xero adds that the average small business could survive “just 12 weeks” if they suffered from a “bad month or two” of late payments.
“There is no excuse for late payments, especially when so much of our accounting can be automated and paid within seconds,” said study author Emma Gannon.
“It causes even more unfairness in business where privileged people who have money can sustain being burnt for longer, and those without spare money floating around will have to close their business”
The research also reveals that 44 per cent of small business owners believe that tax rates are preventing them from growing, while 19 per cent say the same about staff recruitment.
Additionally, 44 per cent are unsure how Brexit will impact on their operations and 31 per cent have hesitations about how they can improve productivity.
And worryingly, the study, which involved some 500 businesses, shows that a quarter believe their company will go under within five years.
Erin Duffy, an Associate in Palmers’ Commercial Litigation team, warned that late payments often result in SME decision-makers having to get creative when it comes to finding new ways to plug gaps in their cash flow.
She added that, in the very worst cases, unpaid invoices can force a once-successful firm to go under if it is unable to find a way to make ends meet.
“Late payments often build up rapidly and can quickly have disastrous consequences if business owners do not act fast to reclaim what is rightfully theirs,” Erin said.
“There is a lot of talk in the media these days about the UK’s worsening late payments crisis, and how the recent introduction of the Small Business Commissioner appears to have done very little to alleviate the problem.”
Erin added: “Palmers provides a debt recovery service that is straightforward, effective and can help your business deal with its invoice debts quickly and efficiently.
“Such services are vital at a time when there appears to be no end in sight for the late payments crisis.”
For more information about how Palmers can help, or to find out more about our Commercial Debt Recovery Scheme, please contact us.