- Small businesses owed £21,356 in late payments in September
– 62% of their turnover
- The smallest businesses are hit hardest with highest
proportion of invoices owed
- Micro-businesses are owed 60% more in late payments than
the last year, despite stronger economic growth
LONDON, Nov. 22, 2021 /PRNewswire/ -- New research from
the quarterly Intuit QuickBooks Late Payments
Bulletin1 reveals late
payments2 are continuing to have a significant impact on
UK small businesses – with the smallest businesses being some of
the worst hit.
Overall, it shows that small and medium-sized businesses (SMBs)
with at least one overdue invoice were owed £21,356 in late
payments on average in September – almost two thirds (62%) of the
average SMB's typical monthly turnover3.
The research also found that the average amount owed to SMBs in
late payments has risen 11% year-on-year, up from £19,224 in
September 2020, as the challenges
experienced during recent lockdowns continue to have a significant
impact. Almost two thirds (64%) of the invoiced amount owed to
small businesses was overdue in September.
Micro-businesses hit hardest by late payments
The research found that micro-businesses (those with turnover of
between £1k - £19k) are some of the worst-hit by late payments from
customers and clients – and that this is getting worse.
Micro-businesses are owed considerably more compared to last
quarter, with the average amount owed rising 26% in September to
£2,400, from £1,900 in May 2021. Over
the last year the gap has grown considerably, with the average
amount owed rising 60% from £1,500 in September 2020.
Two fifths (41%) of micro-businesses' invoices due in September
were still overdue at the time of reporting4. As a
result, the smallest businesses are looking to speed up payments by
tightening their payment deadline terms. Close to half (43%) of
micro-businesses now require instant payment, and this has been
steadily on the rise throughout 2021.
Table 1: % invoiced amount overdue, and average amount owed,
by SMB turnover
Average annual
turnover
|
% Invoiced Amount
Currently Overdue (due in September 2021)
|
Average amount
owed
|
£1k -
£19k
|
41.3%
|
£2,400
|
£20k -
£85k
|
41.3%
|
£5,000
|
£86k -
£200k
|
40.5%
|
£10,400
|
£201k -
£999k
|
39.8%
|
£26,600
|
+£1M
|
38.7%
|
£111,800
|
Harry Pill, Founder of Fresh
Cut Video, said: "We are still feeling the impact of the
pandemic when it comes to late payments, particularly in dealing
with clients in the hospitality and entertainment sector – which
has been under particular pressure.
"It's a tough situation for us, as we're sympathetic to their
plight and don't want to be chasing them and adding interest. On
the other hand, we have done the work and paid for the staff and
expenses involved, yet haven't seen a penny back. We don't have
many options for dealing with late payments, and in the worst-case
scenario may have to write it off. Service providers like my
company need as much help as possible, especially as we also battle
to recover from the impact of the pandemic."
Chris Evans, VP and UK Country
Manager at Intuit QuickBooks, says: "It is concerning to
see that late payments are worsening for the smallest businesses.
With tighter profit margins and limited cashflow, these businesses
will be the most heavily impacted by unpaid invoices. Many
micro-businesses are reducing their payment terms to try to combat
the problem but it appears this is not having the expected
effect.
"Late payments are a burden, but there are ways that small
businesses can arm themselves against the impacts. Investing in
digital software is one option – it can flag invoices and send
automatic reminders as soon as they become overdue, saving valuable
time and reducing stress. Most small businesses are still feeling
the effects of the pandemic on their finances, and they need to be
able to focus on what is really important: recovering and
rebuilding for a successful future."
QuickBooks' top tips for preventing late payments, through
digital software:
- Invoice tracking: Digital tools automatically track
paid, opened and outstanding invoices, allowing small businesses to
keep track of who has paid and who hasn't paid their invoices with
instant real time alerts.
- Offer customers more ways to pay: Financial
management software allows small businesses to offer suppliers easy
ways to pay, from a contactless card reader to direct debit
collection, so they can pay in a couple of clicks. For example,
QuickBooks integrates with GoCardless for recurring payments and
PayPal for electronic payments. This speeds up the process and
enables businesses to be paid without having to share bank
details.
- Set automated reminders: These allow small business
owners chasing suppliers to swap awkward calls and emails with
automated reminders, set to a time that works for them.
Notes to Editors
1Late payments are either:
1. invoices that were paid in full but paid after the due date or
2. still currently unpaid, or not paid in full.
2 Anonymised aggregate data from Intuit QuickBooks's
entire UK customer base. A snapshot of the late payments issues
faced by SMBs in the UK today.
3 For SMBs in the private sector only. Government
business population statistics state there are 5,583,245 private
sector SMEs (0-249 employees) in the UK, with an average turnover
of £2.3 trillion (£2,309,836,000,000). The average annual turnover
is therefore £413,709. Dividing this by 12 gives the average
monthly turnover of £34,475.75.
4Most recent data available.
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