Supply chain · 29 February 2016

Late payment getting worse with 62 per cent of small business invoices not settled until overdue

late payment
The average late payment from one small business to another is 15.9 days overdue

The UK’s late payment problem is getting worse every year, according to new research from P2P business lender MarketInvoice ­– and the majority of invoices are now settled late.

The report – which tracked over 30,000 invoices across five years and 80 countries – has revealed that some 62 per cent of UK SME’s invoices are paid after the due date, with one in five not settled until two weeks after they fall due.

The scale of late payment in Britain is much worse than in other major economies, with only one in four invoices settled tardily by firms in other European countries. Debtors in Belgium pay invoices an average of 4.1 days early, while Irish firm owners pay exactly on time.

The data also show the problem getting better when it comes to firms in the rest of Europe paying British ones at the same time as it gets worse between companies in the UK. In 2013, only 45 per cent of UK firms’ small business invoices were paid late, rising to half in 2014 before climbing to its current high. In contrast, the proportion of EU invoices paid late was 60 per cent in 2013, falling to 40 per cent last year.

Average number of days early or late debtors pay small British firms:

Japan: 6.5 days early

Belgium: 4.1 days early

Netherlands: 3.0 days early

Switzerland: 0.8 days early

Germany: 0.5 days early

Ireland: 0.1 days early

Denmark: 1.2 days late

China: 1.9 days late

Finland: 3.4 days late

UK: 5.85 days late

France: 6.1 days late

USA: 7.1 days late

Canada: 12.0 days late

Poland: 12.0 days late

Israel: 13.5 days late

UAE: 14.3 days late

South Africa: 16.5 days late

Mexico: 18.6 days late

Australia: 26.4 days late

MarketInvoice CEO Anil Stocker said: “Late payment is a silent but significant killer of UK businesses. Clearly this is a massive problem. That other similar economies are so significantly outperforming us should be both a cause of concern and optimism – there is clearly lots of room for things to get better; and lots of places where we can learn how to make things better.

“For now, hundreds of thousands of small business will be feeling bullied by their large customers. They will feel their cashflow squeezed, making it harder for them to hire new staff, compete for new projects and get on with the day-to-day running of their business.”

The findings suggest that banks are the most reliable creditors – with finance the only industry where more invoices were paid early than late in 2015. In contrast, the worst offenders when it comes to tardy payments are retailers, where accounts departments finally cough up an average of 10.7 days late.

late payment

 

Laura Magee, a senior consultant at supply chain consultancy Crimson & Co, argued that policy to combat this has been inadequate. She said: ”There is little protection for a company when it comes to long term payments.

“The Grocery Code has gone some way to offer cash flow security, but it only protects suppliers who provide goods for resale rather than all suppliers of goods and services. Since supplier relationships often involve unequal balances of power, it is up to the management of a supermarket or large supplier to decide whether they want to exploit their position or to take a positive partnership approach.”

The picture painted of the way SME owners pay other small businesses was also worrying. The average late payment in this category is 15.9 days overdue, while the third of small firm bosses settling invoices early jeopardise working capital by paying more than two weeks in advance.

Is late payment crippling your business? Don’t miss this guide to how using the right technology can help.

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ABOUT THE EXPERT

Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics – as well as running a tutoring company.

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