Late payments are leaving micro-businesses with serious holes in their books – which are being filled with loans and credit card debt
In recent times, there has been plenty of recognition of the damage that late payments can inflict upon SMEs. Just a few short weeks ago, the Enterprise Bill was announced in the Queen’s speech, explicitly laying out the government’s tactics to help small businesses resolve payment disputes. But whilst things are certainly moving in the right direction, it seems the UK’s smallest businesses are still disproportionately feeling the brunt of late payments.
According to research commissioned by Intuit QuickBooks, the provider of accounting software, and carried out by Opinion Matters, Britain’s micro-businesses are owed an eye-watering £16.9bn by their customers. This is certainly causing these companies some significant problems. For one thing, many micro-businesses are being forced to rely on debt to shore up their finances; 32% of respondents said they have had to take out loans or rely on credit to pay wages or suppliers. Additionally, the number of customers dragging their feet over payment means that micro-businesses spend an average of 19 working days a year chasing invoices.
In light of this, one might assume that micro-businesses would be keen to grease the wheels any way they can. However, it seems that a significant proportion of the nation’s smallest businesses aren’t embracing tech that can speed up the gap between completing work and payment. The research found that only 36% of micro-businesses issue invoices via email, with many relying on snail mail to send out invoices for completed work.
“As any entrepreneur knows, starting and growing your own business is tough,” said Rich Preece, UK VP and managing director of Intuit. “When you’re putting out fires and jumping over hurdles on a daily basis, you don’t need the distraction of worrying about whether you’ve been paid in a timely manner for your products or services, so it’s disheartening to see the extent of the issue. This wasted resource and unnecessary exposure to risk is stopping [entrepreneurs] focusing on what really matters – time with customers and growing the business.”
Evidently there’s still some way to go in tackling late payments. Here’s hoping the Enterprise Bill can give micro-businesses a helping hand in getting what’s theirs.