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£266bn of SME turnover locked up in late payments but Brexit could make it worse

Written by Eric Johansson on Monday, 08 May 2017. Posted in Cash flow, Finance

New research from Crossflow Payments reveals that 15% of SMEs’ annual turnover is held up by clients who don’t pay on time

£266bn of SME turnover locked up in late payments but Brexit could make it worse

From cashflow issues to sourcing talent, anyone launching a startup is certainly inundated with challenges to tackle. However, it seems that late payments are one of the biggest problems entrepreneurs have to face: according to a new report, almost a quarter of SMEs have trouble with clients not paying in time.

Commissioned by Crossflow Payments, the supply chain finance solutions platform, and conducted by YouGov, the survey of 1,031 senior decision makers at small British firms found that £266bn is held up in late payments each year, which equates to 15% of the £1.8tn turnover British small businesses generate annually. Of the people surveyed, 23% said they struggled with late payments and, of those, 55% said they had to wait on average ten days longer than their payment terms for clients to pay up.

And this is having a negative effect on the nation’s businesses, with the research also revealing that late payments are holding back the growth of SMEs. One in five respondents said that they’d increase their marketing and sales budgets if they were paid on time. Another 17% stated that they’d hire more people, with 63% of those saying that they’d hire up to five more staff members. In other words, if the problem with late payments was solved, it could create an additional 3.4 million jobs on these shores.

Unfortunately it seems as if the problem may actually be intensifying, with one in ten SMEs reporting worsening payment terms since last year’s EU referendum. In light of this, it’s not difficult to see why 31% were concerned about how the next 12 months of Brexit negotiations will affect their business, with one in five worrying about currency fluctuations.

Commenting on the research, Tony Duggan, CEO of Crossflow Payments, said: “Brexit is increasing the issue of late payments and reducing investment by SMEs at a time when the UK faces economic uncertainty. Delays in receiving payment promptly from customers is acting as handbrake on SMEs, 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.”

And Crossflow Payments is certainly not the only organisation to recognise the problem with late payments. In December, research from the Federation of Small Businesses revealed that 72% of SME struggles are down to clients not paying in time. The report also unveiled that 70% of small firms have had at least one legal dispute related to late payments in recent years. Fortunately, the government is attempting to address the issue: in February it launched the search for a small business commissioner to tackle late payments.

Here’s hoping that whoever’s appointed to the new role will be able to help small businesses get paid promptly and once again start investing in their own growth.

About the Author

Eric Johansson

As feature writer and resident Viking, Johansson ensures EB is filled with engaging and eclectic entrepreneurial stories. While one of our freshest faces, he has sharpened his editorial teeth by writing about business, entertainment and fitness.

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