UK SMEs are owed an average £72,000 in outstanding invoices as worsening payment times put increasing pressure on business cashflow, according to research from Bibby Financial Services.
Its latest SME Confidence Tracker finds 60% of businesses say customers are taking longer to pay than a year ago, while 40% have responded by cutting the payment terms they offer customers.
Outstanding invoices rise to an average £143,000 among mid-sized businesses, while average bad debt across SMEs has climbed above £30,000.
The findings are based on research among more than 1,000 UK SME owners and decision makers.
SUPPLY CHAIN PRESSURES
The research also points to growing problems across supply chains.
Some 58% of SMEs have experienced at least one supplier ceasing to trade or becoming insolvent during the past six months, while 55% report the same among customers.
Access to finance is also becoming more difficult. Among businesses using or considering finance, 25% have had a funding application declined and 32% have had credit lines reduced by lenders during the past six months.
The findings come as the Government seeks to tighten rules around late payments through the Commercial Payments Bill.
The proposed legislation includes a maximum 60-day payment term between businesses, mandatory interest on late payments and stronger powers for the Small Business Commissioner.
‘ACCESS TO FINANCE MUST BE A PRIORITY’
Derek Ryan, CEO for North West Europe at Bibby Financial Services, says: “Late payment finally seems to be on the Government’s agenda with the Commercial Payments Bill, which is encouraging. But SMEs need more support.
“Even at 30 days, payment terms cause cashflow headaches for businesses that need to pay staff, suppliers, rent and rates. It’s for this reason many are turning to external sources of finance, but our data shows that for some firms, accessing the finance they need is becoming more difficult than even just six months ago.”
Ahead of the Budget, 32% of SMEs surveyed want robust and effective late-payment legislation by the end of this parliament.
Ryan adds: “The new Government has a fantastic opportunity to stimulate growth in the economy as we move into the final quarter of the year. SMEs must be at the heart of this.
“But many are still facing significant challenges relating to the cost of doing business and accessing the funding they need to grow. Addressing late payment is a good start, but it’s essential they have the support they need to adapt to new legislation. If the Government wants to grow the economy, access to finance must also be a priority.”
