UK SMEs stretched further by late payments
by Jack Large
The latest MarketFinance Business Insights(1) analysis reviewed late payment trends between 2013 and 2019, analysing over 100,000 invoices. The data reviewed how long SMEs are waiting to be paid, how late these payments were and the impact. The key findings were
- Late payments doubled from 12 days in 2018 to 23 days in 2019
- 39% of invoices were paid late in 2019, marginal improvement from 43% in 2018
- Average of £34,286 owed in late invoices, businesses waiting on £34b in late payments
- Larger businesses take longer to settle bills than smaller counterparts
- German debtors taking twice as long to pay invoices in 2019. While French, Italian and Spanish businesses improved on late payment to UK companies.
Typical UK business
The analysis suggests that businesses typically agree on 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 £34b2) were paid late, an improvement in 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).
Other key insights were:
- The number of invoices with long payments terms (anywhere between 60 and 120 days) being paid late almost doubled between 2013 and 2019. Rising from 13% being paid late in 2013 to 23% in 2019.
- Over the 6-year period, the analysis found that larger debtors insisted on longer payment terms (49 days) than smaller debtors (37 days). In addition, when invoices were paid late, these larger debtors also settled much later (94 days) compared to smaller debtors (42 days).
MarketFinance comments
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 cashflow 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 cashflow”.
- “Government measures such as the Prompt Payment Code and Duty To Report 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
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- 1 - Analysis conducted in December 2019 reviewed 100,205 invoices raised by UK SMEs between 2013 and 2019 to a range of businesses across the UK and to 93 countries.
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