Over 30% of UK SME owners nearly gave up over late payments

overdue invoices

New research has revealed 37% of small businesses owners have considered closing their company because of cash flow issues caused by late payments.

The findings highlight the scale of the late payments challenge facing British small businesses, who are owed an average of £23,360 in overdue invoices on any one day and have to wait on average 14 days after the due date to be paid.

The research, by accounting software Xero, showed that the amount owed to small businesses in late payments on any given day in February 2019, was up 17% from the year before, demonstrating the startling growth in tardy payment practices.

The impact of late payments has a damaging domino effect across the UK economy: on average in any given month, 48% of invoices issued by small businesses are paid late, and as a result a quarter of small business owners struggle to pay their own suppliers on time.

In December 2018, the average UK SME owed its suppliers £8,811 in overdue bills, equivalent to £50bn of debt across the small business economy.

As well as the impact on a business’s financials, late payments also negatively impact small business owners’ lives outside work. Over the last 12 months, over half have used personal savings or borrowed from friends and family to keep their business alive, while a quarter said they would enjoy better physical health if late payments were no longer an issue.

Over two fifths said that late payments caused them sleepless nights and affected their mental health.

In contrast, the research suggests that getting paid on time can have a dramatic effect on a small business owner’s happiness and ambitions. Over three quarters of small business owners agree that having a business feels more ‘worth it’ when there aren’t cash flow problems, and a quarter felt they would be in a better position to grow their businesses should late payments no longer be an issue. boosting both the small business ecosystem and broader UK economy.

Gary Turner, co-founder and managing director Xero said, “Late payments don’t just damage business finances and relationships; they can compromise personal finances and relationships. Our research illustrates how getting paid on time can have a dramatic effect on a small business owner’s happiness.

“When they struggle, the whole of the UK struggles. While we welcome the Small Business Commissioner’s ‘traffic light’ warning system for the worst offenders of late payments, more action needs to be taken.”

Nicola Longfield, Director of Small and Medium Business PayPal UK said, “For small businesses looking to grow, time and money are paramount. Late payments sap both and prevent a business owner from investing in the technology, staff or stock needed to sustain and grow their business. That’s why we have been working closely with Xero to try and find solutions to help businesses get paid faster.”

Xero has teamed up with PayPal to help make it easier for customers to pay invoices. By adding PayPal as a payment option to an invoice, customers can get paid up to 21 days faster using their PayPal account or credit card.