A new study into late payments has research has found that than half (53.6 per cent) of small businesses started 2018 in ‘negative cash flow’ as a result of late payments.
In piecing together analysed data from all businesses that currently use its increasingly popular cloud accounting software, Xero found that hundreds of thousands of small business all across the country are still grappling with late payment woes.
On average, typical 30-day invoices are, in most instances, paid within more than 40 days – with even the very fastest payments still coming in eight days later than specified in pre-agreed terms.
The findings come at a time when the Institute of Directors (IoD) is warning that the UK’s late payments crisis has become so severe, new legislation is needed in order to address the “power balance” which is leaving many small businesses in limbo as their larger suppliers and customers continually drag their heels.
In recent weeks, separate research from the IoD has revealed that almost half (48 per cent) of small business have encountered problems with late payments ‘very recently’, while 30 per cent feel that the UK’s payment system is “excessively bureaucratic” and a further 20 per cent believe that larger firms are exacerbating the problem by using “grossly unfair” terms and conditions in relation to invoices.
David Watt, of the IoD, said: “Chasing late payments can have a particularly damaging effect on our SMEs, and in some cases, it can be so bad the SME is forced to fold due to a backlog of unpaid invoices.”