If late paying customers are squeezing the life out of your business then you are not alone. A staggering £67.4bn is owed to UK businesses and the amount is increasing year on year.
The figures published by the Asset Based Finance Association show that the average business is now waiting 72 days to get paid. This is a significant increase on the 61 days it took to get paid at the height of the last recession in 2009 and represents a worrying statistic for the underlying health of the SME sector.
If businesses are owed money, then there is inevitably a knock-on effect on those businesses paying suppliers and continuing until a culture of late payment develops. The manufacturing and construction sectors have been the worst hit with 16% of the construction sector’s annual turnover now consisting of money owed and for manufacturing it was an even worse 17%.
While the figures show that invoices are settled eventually, there will be a percentage that are never settled leading to court action and additional debt recovery costs to businesses.
More worrying still for SMEs is the fact that the figures only represent those businesses who have put together detailed accounts indicating that the problem of late paying customers could be even more widespread. The survey looked at 180,000 SMEs in the UK who had put together detailed accounts though it is likely a large number of smaller micro businesses will have encountered significant cash flow issues as a result of waiting for payments.