A study by Xero has found that the average payment time for UK small businesses on standard 30-day invoices is 40 days.
This means that, with less than 40 days to go before Christmas, a number of SMEs won’t get paid by the time Santa arrives.
Not so jolly
As we know, a lot of suppliers are paid late for their work. As a consequence, more than half (56 per cent) of UK small business owners have to use personal or emergency finance to pay for business expenses, according to GoCardless.
Findings from the study also report that delayed payments are directly impacting businesses and producing a negative ripple effect from one business to another.
More than 80 per cent of small business owners say that uncertainty means that they can’t grow their businesses in the way that they want. What’s more, 67 per cent have to make sacrifices such as salary, holiday or hiring due to late payment.
Taking control of your cash flow
Hiroki Takeuchi, CEO and founder of GoCardless says that it’s unacceptable for small business owners to have so much uncertainty around their payments, pointing to tech for the solution.
‘Currently, only 43 per cent of SMB owners are using tech solutions to ensure they’re paid on time. Direct debit is a great way for businesses to tackle late payment culture by guaranteeing more certainty around when they get paid. Business owners should be able to focus on running and expanding their business, not spending days chasing unpaid invoices.’
Steve Leighton, founder of Has Bean Coffee was working at an all-night petrol station before following his passion for coffee and opening an independent coffee wholesaler. Late payments used to be a major issue for him.
‘Customers paying invoices up to four months late drove us crazy. Now we can automatically take payment when issuing invoices,’ he says.