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22 Nov 2021 / Invoice Finance, Market Research

1 in 3 businesses see late payment as one of their biggest threats to survival

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Late payments are threatening the survival of British businesses, in-depth analysis by leading alternative finance provider, Time Finance, reveals. Uncovering the true impact of late payments, Time Finance found that challenges with cashflow and unfulfilled growth ambitions were the greatest knock-on effects holding businesses back.

For 70% of SMEs, late payments are a recurring issue leading to more severe consequences with over 40% 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% 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.

Surveying the trusted advisors of business owners, Time Finance uncovered that 42% believe that late payments from customers was one of the greatest challenges and threats hampering business success, and one in ten are concerned for anticipated insolvency as a result. Suffering customer service levels, hindered growth plans and pressure on cashflow were cited as the top three negative impacts on business growth from late payments.

As a result of customers not paying their invoices on time, almost one in three businesses also fear their relationships with customers are negatively affected due to chasing payments, whilst over one third struggle to pay their own invoices or their own employees on time.

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.”