Late payments are an even bigger challenge for those medium-sized companies, with 94 per cent of businesses employing over 50 people reporting that the issue is causing cashflow problems for them.
Research conducted into the impact of late payments on the SME sector revealed that overall, 81 per cent of SMEs state late payments are an issue for them.
Furthermore, over half of SMEs believe their business would run smoother if they had fewer late payments. The research discovered that 82 per cent of SMEs have up to £25k in late payments and this rises for medium-sized companies which have an average of over £30k in late payments.
Late payments within the sector are an increasingly public issue, with the main political parties vowing to stamp out the problem with legislation such as late payment reporting.
Anthony Persse, Director of Strategy at Ultimate Finance commented: “We know that late payments can have a huge impact on small businesses. It is without a doubt, one of the biggest challenges faced by UK companies. However, there is a deep misconception that it is an exclusively small business issue which is simply untrue.
“This is leading to rules such as late payment reporting, which is creating an ‘us and them’ situation, when we should be seeking a workable long term solution. This is not just a case of the bigger boys picking on the smaller guys; cashflow and supply chain management affects every organisation, and should be tackled by the community coming together to support one another.”
The impact of government intervention has also been questioned by SMEs themselves. In other research, 38 per cent of small business owners questioned were unconvinced legislation would be helpful.
Ultimate Finance, which works with thousands of SMEs across the UK, believes that the business community needs to look at the way cashflow challenges affect companies of every size, and create an initiative or code of conduct that supports businesses holistically.
“We have taken a look at the numbers,” Persse says. “Many SMEs have significant late payment debt and it’s clear that something must be done. But current methods to help aren’t doing the job; just look at the bank referral scheme which is being evaluated for effectiveness.
“The issue is that politicians keep coming up with one-size fits all ideas and trying to dictate to businesses. Both SMEs and corporates are full of intelligent people who understand the challenges better than anyone.
They should be the ones to create the solution, with support from government and the wider industry – not the other way around.”