**UK**: Nearly 90% of UK businesses are struggling with late payments, hindering cash flow and financial stability. Experts suggest proactive measures and effective use of financial tools to combat these issues, particularly for smaller firms grappling with escalating challenges.
Nearly 90% of businesses in the United Kingdom are experiencing delays in payments, which poses significant challenges for maintaining healthy cash flow. A report highlighted that over half (52%) of these businesses encounter late payments in under 10% of their transactions. However, the situation becomes more severe for nearly one in five (18%) respondents, who report that delays affect a quarter of their payments, while 11% of firms experience late payments in almost half of their transactions.
The economic landscape for smaller businesses appears particularly precarious, as cash flow disruptions can lead to financial instability, especially when these enterprises operate with limited reserves. Alarmingly, one in ten businesses are reportedly unaware of their frequency of late payments, which can further complicate their cash flow management.
The primary causes of these delayed payments are varied, with cash flow issues stemming from customers’ own late payments identified as the most prevalent reason by 40% of respondents. Economic conditions also contribute significantly, with 29% citing worsening financial circumstances as a factor. Administrative failures, including invoicing errors, account for 24% of late payments, suggesting that many small firms still rely on manual processes that are more prone to errors. Additionally, some businesses (18%) reported that they experience delays due to larger companies purposely paying late to utilise the funds longer, seen as a method of free financing.
Technical problems, such as lost invoices, account for 11% of the delays. Moreover, 11% of businesses reported uncertainty regarding the reasons behind their late payments, which could be attributed to inadequate record-keeping and communication strategies with clients.
Joe Phelan, an expert in business credit cards at money.co.uk, provided insights into managing the challenges posed by late payments. Speaking to Start Your Business, he stated, “By adopting proactive measures and leveraging financial tools, SMEs can build resilience and protect their operations from the risks associated with late payments.” He advocated for the effective use of business credit cards, recommending that they be viewed as a short-term financial buffer rather than a long-term solution.
Phelan suggested several strategies for using credit cards effectively, such as selecting cards with longer grace periods and reduced introductory annual percentage rates (APRs). It’s also beneficial if the card offers cashback or rewards, which can help offset business expenses. He emphasised the importance of aligning payment schedules with income timing to manage financial obligations better.
Furthermore, Phelan advised using accounting software to mitigate the risk of errors associated with manual payment tracking, stating, “a credit card should supplement your business’s financial plan, not replace it.”
These insights come at a time when the prevalence of late payments, particularly among smaller businesses, raises concerns about the overall economic health of the UK’s business landscape.
Source: Noah Wire Services
Subscribe to Industry Updates
