Getting paid – SMEs and the late payment burden

The recent Carillion collapse has most certainly shone a light on the issue of late payments within the construction sector, however recent research by the Institute of Directors (IoD) shows the problem is even more widespread.  

According to the IoD survey of 787 company directors, over 50 per cent of businesses have faced issues with late payments in the past year. 3 in 10 business leaders said they consider “excessively bureaucratic payments system” as the main reason for late payment, and just over a fifth say it is a result of ‘grossly unfair’ terms or practices used by larger firms.

What’s more, Xero’s latest Small Business Insights index shows that a mere 49.5 per cent of small businesses in the UK were operating in positive cash flow last year, with SME’s having to wait 46 days on average for invoices to be paid. This delay is squeezing smaller businesses and putting many of them into the red.

Edwin Morgan, Director of Policy at the IoD, says: “It is deeply disturbing that so many businesses have to struggle to claim the money they are owed. Chasing late payments can have a particularly damaging effect on small companies, sapping resources and hurting their productivity.”

Late payments have long been recognised as an issue, with the Chancellor of the Exchequer recently describing the problem as a “scourge” and pledging to eliminate them. The Government also recently appointed the first Small Business Commissioner to help small firms resolve payment disputes, but Edwin says the role is not yet well-known.

“The Government has a job to do to publicise the options that are out there, and we would also urge them to consider stronger measures to clamp down on the menace of late payment,” he adds.

Our SME business experts at Beavis Morgan are available to structure your business with cashflow and profit forecasting to measure performance and maximise opportunities. We work to a pre-determined plan, to help you avoid any nasty surprises.

Through our partner businesses, BM Structured Finance and BM Advisory, we are also able to help with sourcing and restructuring debt finance for SME businesses, as well as assisting with resolving issues which can impact on business performance and success, and finding innovative solutions for businesses and individuals in distress.

If you would like to discuss ways of improving the free cashflow in your business, please contact Steve Govey or your usual Beavis Morgan Partner.