The average payment time for UK small businesses on standard 30-day invoices is 40 days
Today, 13 November, is statistically the last day that SMEs can be guaranteed to get paid in time for Christmas because of habitually late client payments.
According to a study of 250, 000 subscribers to cloud-based accounting service Xero, the average payment time for UK small businesses on standard 30-day invoices is 40 days. With exactly 40 days until Christmas, many SME owners could be waiting until after the holiday to receive payment for work completed earlier in the year.
In a new survey of 250 UK small business owners, online payments company GoCardless found that 56% have to use personal or emergency finance to pay for business expenses that arise due to late payments.
Figures compiled in 2016 by the Federation of Small Business show that 61% of small businesses are paid late by big businesses. Another report found that only 4.7% of enterprises pay all of their invoices within 30 days.
Read more about the late payments crisis:
it’s unacceptable for small business owners to have so much uncertainty around their payments, says HirokI Takeuchi, CEO and founder of GoCardless. When late-payments are resulting in founders taking emergency finance or not being able to pay their bills on time, it’s time to do things differently. Currently, only 43% of SMB owners are using tech solutions to ensure they’re paid on time.
What’s the government doing to help?
While technology can help to expedite the payment process, the FSB has concluded that the UK’s late payment culture can only be tackled with firm legislation. In 2015, the government introduce the voluntary Prompt Payment Code and asked enterprises to publish their payment records, before introducing more stringent transparency measures last year.
Last month, the small business minister Kelly Tolhurst unveiled another set of proposals to help SMEs struggling under the burden of late payments. These measures include a call for evidence to consider the most effective way that boards can implement responsible payments, as well as the promotion of automated accounting technologies.
late payment is the biggest challenge affecting small businesses and it is good to see the government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly, says FSB chairman Mike Cherry. The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.
However, help won’t come fast enough for SMEs hoping to get paid in time for Christmas 2018.