The culture of late payment to UK small and medium-sized enterprises (SMEs) is undermining their growth and the value they bring to the UK economy, latest research has warned.
A staggering 62% of invoices issued by UK SMEs in 2017, worth over £21 billion, were paid late, according to findings from business finance company MarketInvoice. The average value of these invoices was £51,826 and a third of the invoices that were paid late took longer than two weeks from the agreed date to settle. In many cases this meant bills were only settled six months after the raising of the initial invoice.
MarketInvoice assessed different sectors in terms of the proportion of invoices which were paid late, as well as how late the invoices were finally settled. It emerged that sectors which frequently pay late included the food and beverage industry (83%), energy businesses (80%) and wholesalers (79%).
Those sectors which took longest to pay included transport businesses (25 days), utilities (23 days) and those in the media sector (21 days). Businesses in Northern Ireland were found to be the worst late payers within the UK, with 93% of invoices paid late. East Anglia was second worst (68%) while the East Midlands was one place behind in third (63%).
The research, which was conducted in November and December 2017, looked at over 80,000 invoices raised by UK SMEs. It also examined invoices sent to 93 countries. In terms of commercial relationships from overseas, German companies were the worst late payers, taking an extra 28 days to settle invoices past the agreed terms. French firms took an extra 26 days, while US businesses took an extra 20 days.
MarketInvoice said that while UK companies often pay invoices late, those in the US and continental Europe are even more likely to delay payment. The UK takes twice as long (18 days) to pay UK suppliers than counterparts in Europe, which only take nine days.
One factor contributing to the worsening of the problem appears to be a rise in 90-day payment terms demanded by larger businesses. For SMEs, clarifying terms and conditions from the start of any commercial relationships, chasing payments and being prepared to pursue compensation for late payments are all key measures required to minimise the risk to their businesses.