Late payments are leaving micro-businesses with serious holes in their books – which are being filled with loans and credit card debt
There has been plenty of recognition of the damage that late payment can inflict upon SMEs. The Enterprise Bill announced in the Queen’s Speech laid out the government’s tactics to help small businesses resolve payment disputes. But whilst things are certainly moving in the right direction, it seems the UK’s smallest businesses are still disproportionately feeling the brunt of late payments.
According to research commissioned by Intuit QuickBooks, the provider of accounting software, and carried out by Opinion Matters, Britain’s micro-businesses are owed an eye-watering £16.9bn by their customers.
This is certainly causing these companies some significant problems. For one thing, many micro-businesses are being forced to rely on debt to shore up their finances; 32 per cent of respondents said they have had to take out loans or rely on credit to pay wages or suppliers. Additionally, the number of customers dragging their feet over payment means that micro-businesses spend an average of 19 working days a year chasing invoices.
In light of this, one might assume that micro-businesses would be keen to grease the wheels any way they can. But the research found that only 36% of micro-businesses issue invoices via email, with many relying on snail mail to send out invoices for completed work.
Evidently there’s still some way to go in tackling late payments. Here’s hoping the Enterprise Bill can give micro-businesses a helping hand in getting what’s theirs.
Written by Josh Russell for the elitebusiness website and reprinted by the Centre for Entrepreneurs.