Late payments trend to get worse for UK SMEs

Survey of 80,000 invoices from UK businesses reveals stark findings for SMEs coping with late payments.

The culture of late payment to UK SMEs is undermining their growth and the value they bring to the UK economy. Findings from business finance company, MarketInvoice, reveals 62 per cent of invoices issued by UK SMEs in 2017 (worth over £21 billion) were paid late, up from 60 per cent in 2016.

The average value of these invoices was £51,826 and three in ten invoices paid late took longer than two weeks from the agreed date to settle, with some taking almost six months to be paid. The research analyses which sectors, UK regions and countries were the worst late payers to UK SMEs.

Sectors

Sectors were assessed on proportion of invoices paid late and how late, on average, these invoices were actually settled. Sectors that frequently pay late included the food & beverage industry (83 per cent), energy businesses (80 per cent) and wholesalers (79 per cent). Meanwhile, those who took the longest to pay included transport businesses (25 days), utilities (23 days) and those in media sector (21 days).

Regions

Businesses in Northern Ireland, taking the mantle from Yorkshire in 2016, are found to be the worst late payers with 93 per cent of invoices paid late. East Anglia (68 per cent) and East Midlands (66 per cent) came in second and third respectively. Scotland was the best of the worst, where half (53 per cent) of invoices were settled late.

Countries

The research examined invoices sent to 93 countries. German companies were the worst late payers, taking an extra 28 days to settle invoices from agreed terms. French firms took a further 26 days and businesses in the USA 20 days.

While UK companies (66 per cent) often pay invoices late, those in the USA (71 per cent) and continental Europe (73 per cent) are even more likely to delay payment. However, the UK still takes twice as long (18 days) to pay UK suppliers than counterparts in Europe (9 days).

Bilal Mahmood, MarketInvoice spokesperson, comments, ‘A bad situation is getting worse. The problem is being compounded by 90-day payment terms demanded by larger organisations, which are becoming more common. SMEs need to understand what measures they can take to reduce the risk, such as making T&C’s clear from the outset, chasing payments down and enforcing the right to claim compensation from late payments.

‘We look forward to how the Duty To Report 2 measures [which requires large businesses to report on invoice payments twice yearly] that came in to force earlier this year will play out. This is not about naming and shaming but encouraging positive behaviours at big business.

‘SMEs owners respect long payment terms, but late payments are inexcusable. For every day an invoice is late, it’s more time spent chasing payment. This means less time for business owners to focus on growing their business, creating innovative ideas and hiring more people. Things need to change quickly.

‘We want the UK to be the best place in the world to start and grow a business, but the UK’s small-to-medium-sized businesses are hampered by overdue payments. Such unfair payment practices impact a business’s ability to invest in growth and have no place in an economy that works for everyone.’

Further reading on late payments

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