Late Payments Still A Strain on SMEs

9th March 2018.

New research from Close Brothers Invoice Finance shows almost a quarter of SMEs are still suffering from late payments from customers.

Late payments have always hurt SMEs the most. Their limited revenue means any trouble within the supply chain threatens the success of the whole business. Despite various efforts by the Government and other sources to combat the matter, the late payment culture still prevails in the UK. According to new research from Close Brothers, while the number of firms experiencing serious problems has fallen over the past three years, almost a quarter are still suffering at the hands of customers who do not pay their bills on time.

Late payments can be damaging, even devastating, to small businesses. However, they do not necessarily warrant the involvement of a high street lender, or worse, an insolvency practitioner. Here at the Credit Protection Association, we have helped many of our members combat late payers and even non-payers. Negative cash flow can be avoided, and businesses can input safeguards to stop further injury to your business.

The Close Brothers’ latest Invoice Business Barometer shows that 24.2 percent of SMEs now regard late payments as a problem for their business. While that is down from 33.2 percent in March 2015, it means one in four SMEs are still struggling to cope with the unceasing damage to their cash flow.

The research also suggests that the size of the late payments issue is increasing for many SMEs. 25.2 percent of businesses suffering reported that they are owed more than £40,000, almost twice as many as the 13.2 percent of SMEs suffering to this extent in March 2015. A further 33.8 percent were owed between £20,000 and £40,000, up from 22.7 percent three years ago.

Since the collapse of the construction giant, Carillion, late payments have filtered into the mainstream. Accusations of supply chain bullying have been rife, and large companies have revealed to be just as vulnerable to late payers as their smaller counterparts. While the problem is getting better, it is still a problem. Rather than waiting around for the next government initiative, the best way to prevent further damage to your trading record is to prepare your business for the worst-case scenario.

At the Credit Protection Association, we understand the damage that bad payers can inflict on businesses. In response; as well as our debt recovery services, we also offer our members a range of credit management products, from credit reports to monitoring tools. These checks will reduce your exposure to risk, and reveal your customers’ payment record, including any times when they have paid late. Running and operating a business is hard enough, and by credit checking your customers and suppliers, you can make the whole process easier and more profitable.