Late payments to UK small and medium-sized firms have doubled from 12 days in 2018 to 23 days in 2019, according to research by MarketFinance Business Insights.
Its survey of 100,000 firms also found that:
- 39% of invoices were paid late in 2019, a marginal improvement from 43% in 2018.
- On average £34,286 was owed in late invoices, with businesses waiting on £34bn in late payments at any one time.
- Larger businesses take longer to settle bills.
The analysis suggests that businesses typically agree 45-day payment terms from completion of work or delivery of goods. Despite this, almost two-fifths (39%) of invoices issued in 2019 (worth over £34bn) were paid late, an improvement on 2018 when 43% of invoices were paid late. However, the number of days an invoice was paid late in 2019 has doubled to 23 days from 12 days in 2018. Invoices paid late were typically larger in value (£34,286) than those paid on time (£24,624).
Bilal Mahmood, External Relations Director at MarketFinance, commented: “It’s great to see that fewer invoices were paid late in 2019, but worryingly, those that were paid late took twice as long as in 2018, up from 12 days to 23 days. Late payment practices harm business cash flow, hampers investment and, in extreme cases, can risk business solvency.
“Separate research we’ve conducted highlighted that 87% of businesses are prevented from taking on more orders because of the cash flow constraint owing to late payments. Overall, it seems who you are doing business with and where they are based is important to know for a small business if they need to forecast cash flow.
“Government measures such as the ‘Prompt Payment Code’ have helped create awareness but need more bite. Until this happens, there are ways for SMEs to fight back against the negative impact of late payments, from having frank discussions with debtors that continuously fail to adhere to agreed payment terms, to imposing sanctions on those debtors, or seeking out invoice finance facilities to bridge the gap.”