Contractors and SMEs could lose out on unpaid invoices

Wednesday 9 October 2013

Contractors could be among the small businesses losing billions every year as a result of simple mistakes, research from business software provider Exact has found.

The study shows that as many as one in five small firms admit they have forgotten to invoice a client for goods or services on one or more separate occasions, indicating that internal processes in many of the nation’s smallest companies could be hindering their success. Smaller value contracts were understandably more commonly forgotten: a quarter said they had forgotten to invoice for a job worth anything between £500 and £1,000, while an additional third said they had not sent an invoice for goods or services worth £1,000-£5,000.

What is more concerning, though, is the number of higher value contracts that have been neglected by contractors and other small businesses. Significantly, nearly an eighth of the businesses surveyed said they had neglected to invoice for work worth anything from £5,000 to £10,000 - and another six per cent had forgotten to send an invoice for an even higher amount. According to Exact, this means that the UK’s 4.8 million small and medium-sized enterprises could be losing out on a collective £3.7 billion.

Failing to invoice clients and receive payment can be a serious problem for businesses, as lengthy delays and non-payment can lead to intermittent cashflow and even financial losses. It looks as though these issues are already taking their toll: 45 per cent of small firms say they have been forced to defer some form of payment to vendors thanks to cashflow issues. Close to 30 per cent had held off paying suppliers, while another 14 per cent had paid fixed bills late and a similar number had been forced to delay paying off their loans or overdraft. Worryingly, some 12 per cent had even failed to pay wages on time.

Harmut Wagner, managing director of cloud solutions at Exact, said: “We don’t want to blow this issue out of proportion, but these findings do highlight that many SMEs who are eager to grow are not doing themselves any favours, particularly with so many of them expressing concern over their cash-flow.”

Perhaps this explains why although competing for new business is the biggest cause of stress for three out of ten small businesses, financial worries are not far behind. A total of 23 per cent of small firms said they faced these concerns, with issues including cashflow, debts and business planning all mentioned. In fact, one in four of the UK’s smallest companies confessed that they do not feel as though they are in control of their finances in any way.

With a further 15 per cent of small firms saying that their workload was their primary cause of stress, cash flow worries are the last thing that most contractors and business owners need. However, they were aware of places to turn for advice and support - among these, more than half said they trusted their accountants to provide guidance when they needed it. Just 29 per cent trusted their spouse or partner, while less than a fifth would trust their bank manager the most.

By Victoria McDonnell

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