£44 billion owed to SMEs in late payments

Wednesday 12 April 2017

Many small and medium-sized enterprises (SMEs) are owed thousands of pounds in late payments, according to a new survey. The Zurich SME Risk Index has revealed that over half of the SMEs in the UK are owed a total of £44.6 billion in late payments, putting a strain on small businesses and self-employed individuals. 

The survey of more than 1,000 SME owners and decision makers found that one in five companies are owed over £25,000 in payments. When it comes to being owed more than £100,000, around one in ten SMEs are in this position.

Being owed large sums of money due to missed payments causes severe funding gaps for many SMEs, with 39 per cent saying it affects their cash flow and 25 per cent admitting it puts them into overdraft.

Almost two-thirds (65 per cent) of SMEs told the survey that they can be waiting for payment for longer than two months, while delays of up to six months are experienced by 14 per cent of those surveyed. Almost half end up having to wait for up to three months for payments that are already late.

Paul Tombs, head of SME proposition at Zurich, said: “£44 billion owed in late payments to British SMEs is an enormous sum. It is no surprise that many have experienced cash flow problems or have been forced to enter their overdrafts as a result.

“On an individual basis, many small businesses are owed hundreds of thousands of pounds. In an environment where cash flow is key to small business survival, the situation is simply unsustainable. It is imperative that SME owners receive the support and guidance required and fair access to the funds that they are owed to secure the future of their businesses.”

Some 65 per cent of the SMEs questioned said that late payments are a directly contributing factor to the closure of small business in the UK, meaning they can have a devastating effect on companies as well as individuals. 

A large number also highlighted the need for more government support for SMEs in order to mitigate the problems that come about as a result of late payments. 

Dealing with the day-to-day running of your SME, whether you are a self-employed individual, a company or contractor, can be difficult enough without having to deal with the financial side of things. 

While freelancer and contractor accountants may not be able to stop payments being late, they can help arrange your finances to limit the damage that they cause and ensure you can focus on other aspects of your business.


By Victoria McDonnell

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