What’s the biggest issue facing SMEs in the UK today? Well, as accountants we have found that the principal problem SMEs face is that of late payments. Bigger, more established businesses and companies may be able to survive if suppliers fail to pay on time, but that simply isn’t the case for smaller enterprises. In fact, in some cases late payments can not only stifle growth, but they can determine whether SMEs succeed or survive.
So how serious is this problem? Well, research carried out by YouGov would suggest it’s very serious indeed. According to YouGov late payments from suppliers are preventing SMEs from accessing a staggering £266 billion rightfully owed to them. How did YouGov arrive at this figure? Well, the calculation was based on an estimation of the annual UK SME turnover of £1.8 trillion. That figure stands in stark contrast to the government’s own estimated calculation of £26.3 billion, and that is the amount owed despite new UK enacted laws which require large firms to report their payment terms and publish them via an online government service, or face criminal action.
So how was the YouGov survey conducted and what exactly did it find? The survey, commissioned by Crossflow Payments, polled 1,031 SMEs. Its findings revealed that 15 per cent of all small firm turnover was subject to late payment in 2016, with 23 per cent of respondents declaring they don’t normally have their invoices settled on time. How long are these payments delays? Well, the survey found that 55 per cent of the SMEs polled had to wait on average 10 days or more beyond their payment terms.
If all the invoices were settled on time, 22 per cent of the SMEs surveyed said they would increase their marketing and sales budgets, 17 per cent said they would hire more staff, and a further 17% per cent said they would increase the wages of existing employees. Most importantly of all, 63 per cent of the small businesses surveyed said late payments were having a direct effect of job creation. If they had been paid on time these SMEs said they would use the missing working capital to take on new staff. According to Crossflow Payments the extrapolated figures could result in the creation of 3.4 million extra jobs, based on the estimated 5.5m small businesses in the UK.
If this was simply a one-off survey, then perhaps the Crossflow Payments findings could be taken with a pinch of salt. Sadly, however, other research also suggests that late payments really are problem from the SME community. Research conducted by the Zurich SME Risk Index in April, 2017, found that 21 per cent of the 10,000 SMEs surveyed were owed more than £25,000: what’s more, 9 per cent were owed more than £100,000, causing funding gaps and cash flow problems. Last year research by Intuit Quickbooks also found that UK micro businesses were owed nearly £17bn in outstanding payments. The consequences of these late payments it claimed was “stifling the growth” of the businesses which it believed were underpinning the nation’s economic recovery.
Speaking about the latest SME survey, Tony Duggan, CEO of Crossflow Payments, said:
“Delays in receiving payment promptly from customers is acting as a handbrake on businesses, preventing them from making key investment decisions for the future, and ultimately stunting growth. In 2017, it should no longer be the case that businesses face such hurdles.”
“The business community must work together in order to address this issue and explore new, innovative approaches, such as the capacity of fintech [financial technology], to help solve this issue, creating a win-win for business and government,” he added.
If your business is suffering from cash flow problems because of late payment problems, then contact Steven Glicher accountants for expert help and support. Our accountants can help you to overcome any fear of day-to-day financial management. We can work with you and help you to prepare a sound business plan, expertly assess your cash flow position and recommend the most efficient system, manage your accounts and we can even help you to seek funding or further investment. For more information on how Steven Glicher accountants Stockport can help your business, call Steven Glicher on 0161 485 8007 or email firstname.lastname@example.org.