Micro SME’s An Average 68k In Debt Due To Late Payments
According to data from Companies house, the average micro SME is £68,000 in debt. Behind this staggering statistic is a struggle to maintain cash flow due to late paying customers.
Running a small business of less than 10 employees can be as tough as running a large organisation, particularly if the business relies on just a few clients to cover its costs and pay staff. Analysis of 4,192 of these micro businesses found that the average £68,000 of trade debt was accumulated in the last financial year alone.
According to statistics, micro businesses waited an average 63 days for payments which is more than double industry standard payment terms of 30 days. The problem is so entrenched in the small business sector that one in five businesses have been subjected to what is referred to as ‘supply chain bullying’ from their larger clients according to the Federation of Small Business.
The culture of late payment has worsened in recent years but help may be at hand with The Small Business, Enterprise & Employment Bill currently being put through parliament. The bill did include an amendment that recommended a daily late payment interest charge of 8% above the base rate but this was ultimately rejected by MPs.