Time Finance published new data that reveals that 70% of businesses are awaiting overdue and late payments from their customers. We were shocked to learn that one in five SMEs are sitting on late payments owed to them of over £200,000. We take a look at the statistics here and what this means for businesses.
It is clear that despite the introduction of the Prompt Payment Code from the government, first introduced in 2008 and subsequently strengthened earlier this year, businesses are wary of its success. Signatories of the Prompt Payment Code now require businesses to pay 95% of their invoices within 60 days, and for suppliers who have less than 50 employees, invoices must be settled within 30 days. However, 72% of the Time Finance survey respondents felt that the Prompt Payment Code doesn’t go far enough to successfully tackle the spread of late payments and many cited a lack of enforceability for their reasoning.
As reported by Credit Connect: Phil Chesham, Head of Invoice Finance at Time Finance, said “We have always known that the UK’s late payment culture is a huge threat to businesses, but our survey has shed light on the true scale of the issue, and it appears to be getting worse.
“When the government announced its reforms to the Prompt Payment Code in January, it was accompanied with a pledge that it would tackle late payment and protect jobs. The steps taken have been too small and are clearly not having the required impact. We’re finding that 69% of small businesses fail to receive payment from their customers within the agreed 30-day payment term and are often left waiting 60, 90 or 120 days. This is unacceptable.
“The potential in that outstanding revenue is enormous; that money could be working capital that a business invests in new people, new equipment, new premises or new markets. Unpaid invoices, in my opinion, equate to missed opportunity.”
We often say cash flow is the lifeblood of a business and that’s because it’s true. Without an adequate flow of cash, businesses are not able to survive their day to day operations, including paying staff and their own suppliers. This is why late payments can cause a spiral effect and trickle down through the supply chain, damaging multiple businesses. And without enough cash flow for the day to day expenses of running a business, businesses are never able to progress and grow and accumulate the capital needed to invest in new processes, machinery or additional staff.
Now that various support measures from the government to protect businesses throughout the global pandemic have been lifted, we are in a stronger position to support our clients when they are facing late payments from customers. With the return of winding up petitions allowed (provided the debt doesn’t relate to COVID-19 issues), businesses are starting to reclaw some of the debt that has been stacking up. But, it is clear that businesses themselves need to do better and ensure that they are paying invoices on time to support their suppliers.
If you’re stuck in a loop of late payments and need some help to make headway with your customers then reach out to our team of experts today. We’ll take a look at each of your cases and approach them with a bespoke plan of action to work towards a positive outcome for your business. Get in touch with us today.