The latest NerdWallet survey reveals a concerning figure: 55% of SMEs are entangled with outstanding invoices from the last tax year.
This alarming statistic not only highlights the pervasiveness of the issue but also serves as a clarion call for further governmental action.
The Persistent Challenge for SMEs
Cash flow is the lifeblood of any business, yet for many UK SMEs, this vital flow is impeded by the clog of unpaid invoices.
The survey’s data reflect a grim trend: nearly half of the businesses surveyed are ending the fiscal year with more outstanding invoices than the previous one, signaling a deepening crisis.
The UK’s struggle is not in isolation. Although the European average is lower than that of the UK, the figures are still significant, with approximately 40% of invoices remaining unpaid past their due date.
Various factors, including economic uncertainty and market volatility, contribute to this discrepancy.
Moreover, certain sectors are disproportionately affected, with the construction and freelance industries bearing the brunt of late payments.
UK legislation offers a recourse for businesses suffering from late payments, permitting the addition of interest to overdue amounts.
However, this survey uncovers a startling gap in the application of this legislation, with a mere 23% of businesses exercising this right.
This is a missed opportunity for many, as charging interest on late payments can serve as a deterrent to chronic late payers.
Preventative Measures
Prevention is as crucial as recovery.
Implementing robust credit control systems, conducting due diligence on new clients, and employing invoice tracking software are proactive steps businesses can take to minimise the risk of unpaid invoices.
For those already facing overdue payments, the course of action is clear.
Engaging with debtors firmly and promptly, leveraging legal measures like interest charges, and utilising government-backed support can help in reclaiming owed funds.
Additionally, resources such as the Small Business Commissioner and the Prompt Payment Code provide avenues for support and advocacy.
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