Many small business owners are facing pressure on their finances as a result of late payments. Research conducted by Sage, the accounting and payroll corporation, has shown a staggering £55 billion in outstanding invoices owed to the UK’s small and medium-sized businesses.
Late payments most obviously affect cash flow, a third of small firms are forced to use external finance because of this, but another consequence is the amount of time wasted in chasing payment, which costs a typical small business 130 hours a year.
According to the Close Brothers barometer a record 51% of small businesses cite cash flow, working capital and late payments as their main business concern, with almost 20% saying the situation has deteriorated over the last year and 15% are claiming it is threatening their ability to trade. In fact, insolvency trade body R3 states that late payment is a major factor in 1 in 5 corporate insolvencies.
The barometer also showed over half of small businesses writing off up to 10% of their turnover in the last 12 months and almost a quarter writing off between 10% and 25%. Secure payment providers Worldpay have found around £2.4 billion being written off by micro-businesses every year.
A recent development in this area spells further trouble for small firms as the Ministry of Justice plans to impose a 5% court fee on claims chasing late payments and other debts, potentially as much as £10,000.
If your business is being affected by late payments, or you have any other corporate insolvency issues, then we would encourage you to contact us and speak with one of our experienced Insolvency Practitioners who will be more than happy to provide guidance and advice. An initial consultation is provided free of charge. Contact us.