No sign of an end to SME late payment pain

  • One in four SMEs continue to face a late payments problem, Close Brothers research reveals
  • The scale of late payments continues to increase with one in four SMEs owed more than £40,000
  • Almost half of SMEs now using or considering invoice finance products

Small and medium-sized enterprises continue to suffer from late payments from customers in huge numbers, new research from Close Brothers Invoice Finance reveals. While the number of firms experiencing significant problems has fallen over the past three years, almost a quarter are still suffering at the hands of customers who do not pay their bills on time.

The latest quarterly Close Brothers Invoice Business Barometer shows that 24.2 per cent of SMEs now regards late payments as a problem for their business. While that is down from 33.2 per cent in March 2015, it means one in four SMEs are still struggling to cope, despite a series of government initiatives designed to get on top of the problem.

Close Brothers’ research also suggests that the size of the late payments issue is increasing for many SMEs. In the latest Close Brothers Invoice Business Barometer, 25.2 per cent of businesses suffering reported that they were owed more than £40,000, almost twice as many as the 13.2 per cent of SMEs suffering to this extent in March 2015. A further 33.8 per cent were owed between £20,000 and £40,000, up from 22.7 per cent three years ago.

CEO David Thomson, of Close Brothers Invoice Finance said SMEs needed more help to crack down on late payments, with the issue threatening to hold back the growth prospects of many firms. “Our research suggests that despite a series of efforts to combat the matter led by government and other organisations, too many SMEs still aren’t being paid on time,” David said. “This is an issue causing real hardship for many firms and has negative implications for the performance of the economy as a whole.”

Close Brothers’ research also suggests that invoice finance continues to play a key role in helping SMEs unlock the value tied up in invoices issued to customers – but that more work needs to be done to prove the case for this type of alternative finance. Some 37.2 per cent of SMEs says they would consider invoice finance, while 9.9 per cent already use it, though these figures are down from 43.8 per cent and 11.9 per cent respectively in March 2015.

“Invoice finance can provide crucial funding for growing SMEs,” Close Brothers’ David Thomson added. “While it provides a potential solution to late payments-related issues, the broader picture is that invoice finance offers a number of key advantages compared to funding growth from traditional sources of business support.”

Press Release supplied via Close Brothers. All figures, unless otherwise stated, are from a GMI survey conducted December 2017. The survey canvassed the opinion of 900 SME owners and business managers from several industries across the UK and Ireland on a range of issues affecting their businesses.