Issues around late payments of invoices have increased significantly since the onset of the coronavirus pandemic, according to recent research.
Figures collected by the trade credit insurer Atradius suggest that almost half of all the bills sent out by B2B companies are now being paid late, with the pandemic having put so much extra financial pressure on so many businesses.
Prior to the pandemic, around 26 per cent of invoices were being paid late but the proportion has now risen to around 47 per cent, which of course equates to serious financial headaches for a huge number of UK companies.
Indeed, Atradius’ research shows that around half of all B2B businesses have suffered revenue losses to some extent because of late payments, while the average firm is now having to write off roughly £8 in every £100 they invoice for as being effectively uncollectable.
“The Covid-19 pandemic arrived at a time when the business community in the UK was already working hard to accommodate the challenges and uncertainties posed by Brexit,” said James Burgess, head of commercial for Atradius UK.
“For some industries, such as retail and automotive, the lockdowns and disruptions to supply chains have added further stress to sectors that were already grappling with structural challenges,” he added.
In addition to late payments, businesses are currently faced with a variety of other potential challenges to their financial stability, not least the growing prevalence of sales made on credit.
According to Atradius, there has been a significant rise in the frequency with which companies are making sales based on credit since the pandemic began, with 60 per cent of the total value of B2B sales now being agreed on those terms.
Offering products or services on credit has grown more common during the virus crisis because of the ongoing need to stimulate sales and to be competitive but a third of companies have also been forced to turn down credit requests as a result of a “worsening in customer payment behaviour,” according to Atradius.
Figured compiled by the Federation of Small Businesses (FSB) suggest that there are close to 50,000 small firms forced to close every year in the UK because of issues associated with late payments.
Earlier this year, the UK government pledged to start fining big companies that routinely fail to pay their smaller suppliers on time and to beef up the powers of a small business commissioner tasked with taking action on the issue.