Findings from global research conducted by the business finance company MarketInvoice in November / December 2017 which analyzed 80,904 invoices raised by UK SMEs to a range of businesses across the UK and to 93 countries reveal that 62% of invoices issued by UK SMEs in 2017 (worth over £21B) were paid late, up from 60% in 2016. The culture of late payment to UK SMEs is undermining their growth and the value they bring to the UK economy, indicated the research firm. The average value of these invoices was £51,826 and three in ten invoices paid late took longer than two weeks from the agreed date to settle, with some taking almost 6 months to be paid. The research analysed which sectors, UK regions and countries were the worst late payers to UK SMEs.
“A bad situation is getting worse. The problem is being compounded by 90-day payment terms demanded by larger organisations, which are becoming more common,” indicated MarketInvoice spokesperson Bilal Mahmood. “SMEs need to understand what measures they can take to reduce the risk, such as making T&C’s clear from the outset, chasing payments down and enforcing the right to claim compensation from late payments.”
Sectors were assessed on proportion of invoices paid late and how late, on average, these invoices were actually settled. Sectors that frequently pay late included the food & beverage industry (83%), energy businesses (80%) and wholesalers (79%). Meanwhile, those who took the longest to pay included transport businesses (25 days), utilities (23 days) and those in media sector (21 days).
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Businesses in Northern Ireland, taking the mantle from Yorkshire in 2016, were found to be the worst late payers with 93% of invoices paid late. East Anglia (68%) and East Midlands (66%) came in second and third respectively. Scotland was the best of the worst, where half (53%) of invoices were settled late.
“We look forward to how the Duty To Report 2 measures [which requires large businesses to report on invoice payments twice yearly] that came in to force earlier this year will play out. This is not about naming and shaming but encouraging positive behaviours at big business,” added Mahmood. “SMEs owners respect long payment terms, but late payments are inexcusable. For every day an invoice is late, it’s more time spent chasing payment. This means less time for business owners to focus on growing their business, creating innovative ideas and hiring more people. Things need to change quickly.”
The research examined invoices sent to 93 countries. German companies were the worst late payers, taking an extra 28 days to settle invoices from agreed terms. French firms took a further 26 days and businesses in the USA 20 days.While UK companies (66%) often pay invoices late, those in the USA (71%) and continental Europe (73%) are even more likely to delay payment. However, the UK still takes twice as long (18 days) to pay UK suppliers than counterparts in Europe (9 days).
“We want the UK to be the best place in the world to start and grow a business, but the UK’s small-to-medium-sized businesses are hampered by overdue payments,” concluded Mahmood. “Such unfair payment practices impact a business’s ability to invest in growth and have no place in an economy that works for everyone.”