The culture of late payment to UK SMEs is a regular topic in our weekly Business Finance Bulletin and the reason for this is that delayed payment hurts many businesses by undermining their growth and the value they bring to the UK economy.
A new survey from business finance company MarketInvoice reveals that 62% of invoices issued by UK SMEs in 2017 (worth over £21b) were paid late, up from 60% in 2016.
The survey found that the average value of these invoices was £51,826. A third of invoices paid late took longer than two weeks from the agreed date to settle – some of which took almost 6 months to be paid.
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).
In terms of regional experiences, businesses in Northern Ireland 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.
The Marketinvoice research also 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).
To lessen the impact of late payment Marketinvoice suggests,
– making T&C’s clear from the outset
– chasing payments
– and enforcing the right to claim compensation from late payments
The Duty to Report measures, which requires large businesses to report on invoice payments twice yearly, that came in to force earlier this year will help but how effective it will be remains to be seen.