LATE payments are threatening the survival of many British businesses, according to finance provider, Time Finance, who have offices in Warrington.
An analysis by the company found challenges with cashflow and unfulfilled growth ambitions were the greatest knock-on effects holding businesses back.
For 70 per cent of SMEs, late payments are a recurring issue leading to more severe consequences with over 40 per cent worrying about their own cashflow as a result. Recent figures from the Federation of Small Businesses estimate that 50,000 businesses close each year due to late payments.
Time Finance found that less than one in three businesses are paid by their customers within the agreed 30 days terms, with an astonishing 70% per cent waiting more than 60, 90 or 120 days. For some firms, this leaves them in a crippling position with a quarter struggling to pay HMRC.
Phil Chesham, head of invoice finance at Time Finance, commented: “The UK’s late payment culture is plagued by a real domino effect and can perpetuate much wider problems. There are a number of worrying things we can see in our statistics. Businesses have to spend money to make money, but how can they do this if their potential working capital is tied up in unpaid invoices? We can see businesses being held back by late payment and this then has wider consequences for the UK economy. Our economic recovery and growth relies on the recovery and growth of businesses. If one is stunted, so is the other.
“What’s more, our survey found that for many businesses chasing payments negatively impacts their relationships with their own customers and as a result almost one third struggle to pay their own invoices on time; this truly demonstrates the vicious cycle that late payments can create. Businesses must work together to ensure that tackling the culture around late payments is a business priority – as we’ve seen already with the introduction of the Prompt Payment Code, legislation alone won’t fix this.
“At Time Finance we are committed to understanding the challenges that our clients face and we work with them to overcome those hurdles. Our Invoice Finance solutions enable businesses to unlock working capital from the value of their unpaid invoices, giving them the financial freedom to reinvest in their business and grow. We recognise that chasing payments from customers can be an uncomfortable process and takes up a substantial part of the working day. Our professional credit control teams take the strain of that away, leaving firms to focus on more important things – like running their business.”