SMEs Waiting Twice as Long for Late Invoice Payments

Written by: Keith Tully

Published: 9th December 2019

Hourglass on invoiceSmall and medium-sized enterprises (SMEs) are waiting almost twice as long for the payment of their overdue invoices in 2019 than they did last year.

That’s according to the findings of research carried out by the business body Market Finance, which found that invoices that initially went unpaid ended up being settled, on average, 23 days after their due dates this year.

That figure for 2019 marks a sharp extension on the comparable number for last year, when late invoices were typically paid 12 days after they officially became late.

As many business lobby groups have long been keen to point out, late payments is a major problem for SMEs and particularly those already under significant cash flow pressures.

Indeed, for many companies, late payments, particularly when the figures involved relate to large sums of money, can be the difference between staying in business and falling into administration or liquidation.

Market Finance says that marginally more invoices were paid on time in 2019 than the year before, but those invoices that were paid late this year have tended to be larger than those that were settled on time.

Assessments were made of around 100,000 invoices issued between 2013 and 2019 by Market Finance, with invoices that had longer payment terms of between 60 and 120 days found to be getting paid late, on average, almost twice as frequently this year than was the case back in 2013.

An array of sectors have found late payments to be a common feature of their operational landscape in recent years, with professional and legal services businesses particularly badly hit and the norm for them apparently being that 70% of invoices end up being paid late.

Manufacturers typically see a majority (57 per cent) of their invoices become overdue, while retailers suffer the same issues in just less than 50 per cent of cases, according to the latest figures on the issue.

“Late payment practices harm business cash flow, hampers investment and, in extreme cases, can risk business solvency,” said Bilal Mahmood from Market Finance.

“Separate research we’ve conducted highlighted that 87 per cent of businesses are prevented from taking on more orders because of the cashflow constraint owing to late payments.

“Overall it seems who you are doing business with and where they are based is important to know for a small business if they need to forecast cashflow.”

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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