SMEs are continuing to establish themselves as an important part of the UK economy. In 2018 SMEs turned over £2.0 trillion which accounted for 52% of the private sectors revenue contributing significantly to the economy. However, 2018 also saw 27,000 less small businesses than the previous year, the equivalent of 0.5% of the private sector business population. Out of all corporate insolvencies in 2018, 23% were found to be caused by late payments which goes to show why late payments is a serious issue that needs to resolved.
As opposed to larger corporations, smaller businesses can find it more difficult to manage and withstand cash flow shocks such as those occurring from late invoice payments. Research by Zurich has found that 45% of victims of late payments are waiting for up to three months before being paid. Waiting an entire quarter to be paid jeopardises small business’ expansion plans as well as relationships with other companies who they may pay late as a knock on effect. 2018 was in fact the first year from 2000 that saw the number of businesses in the UK fall and with the issue of late payments becoming more and more apparent it would not seem unjust to link the two.
The uncertainty effect caused by being paid 60-90 days late may have an internally negative impact on SMEs. Covering costs such as employee salaries and any other financial commitments becomes increasingly difficult and it can be difficult for the company to make any plans to expand or even survive in a highly competitive environment. For example once a buyer pays a supplier late that business relationship is immediately put under strain and may result in the supplier becoming reluctant to commit to any future interaction. This damages the reputation of the buyer and means they now need to spend the time and resources finding a new supplier.
A recent study by Bacs (UK payment experts) found that UK SMEs now face a collective bill of £6.7 billion to collect money owed, which has risen from £2.6 billion in 2017. This goes to show how much could be saved for small businesses if the process of collecting late payments was facilitated. SMEs now account for 99% of all UK businesses. If the late payment issue was to be seriously combatted, they would be able to thrive and the UK economy would do nothing but reap the benefits.
We are building a rare win-win business: SMEs are able to instantly recover late invoices using our platform to access world-class collection agencies, late payers select instant payment plans and issue resolution and collection agencies gain a new revenue stream using simple integration.