New research reported by Credit-Connect last week revealed that small businesses are missing, on average, a huge £130k from late payments over the last twelve months. The survey, conducted by Dun & Bradstreet (D&B), global business analytics provider, polled over 750 businesses. They found that over 20% of payments made to these businesses were late, regardless of whether the payer was a small, large or public sector organisation.
Credit-Connect stated that:
Over half (51%) of SMEs rely on suppliers making payments on time to remain solvent, while the same number (51%) claim late payments affect the productivity of their business overall. Furthermore, a fifth (23%) of small business owners have had to use personal savings or assets to cover the shortfall of late payments – increasingly from one-in-eight (13%) in 2019.
The pandemic has of course increased the number of late payments occurring on a regular basis. But, with the recent changes to the Prompt Payment Code, it is hoped that this will go some way to improve the situation. As we reported before, the reforms mean that signatories of the Code will now have 30 days to pay small businesses (less than 50 employees), which was halved from the previous 60 days. The government is also looking to strengthen the powers of the Small Business Commissioner to increase the support that they can provide small businesses when tackling late payments.
The number of late payments reported by the D&B survey in 2019 had decreased from the previous year by almost 10% but then 2020 saw an increase on the prior year’s figures of 76%. Only 42% of businesses are making payments on time, which demonstrates just how rife this issue is. Over 54% of businesses surveyed felt that the government should introduce stronger penalties for businesses who fail to make payments on time.
Sean Husband, Director of My Debt Recovery said, “It’s been a tough year for SMEs for a number of reasons but the increase in late payments has been particularly damaging. Cash flow is the lifeblood of many smaller businesses. So to see that impacted by clients who are either paying late or in some cases not paying at all, has been worrying for them. We are proud of the work that we have been able to do to support SMEs throughout the pandemic and we look forward to continuing that support as the country heads back to some form of normality in the coming months.
“However, we can’t stress enough how important it is to engage with us sooner rather than later when it comes to tackling your commercial debt recovery. We are anticipating an influx of business insolvencies in the early autumn, as government financial aid is due to draw to a close. Once a company becomes insolvent, it might be too late to recover your debts. Move your business to the front of the queue and instruct us to work on your behalf today.”
If you need an expert to take on your commercial debt recovery then reach out today. Our team of experts are on hand to talk through all of your options and help you improve your cash flow position with an injection of cash that is rightly yours.