New research reveals that 90% of UK businesses grapple with late payments to some extent.
The news comes as UK businesses face record-low confidence and a 16-year high in insolvencies.
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A recent analysis by money.co.uk business credit cards highlights that nine in ten UK businesses experience payment delays, significantly impacting their cash flow. This issue is particularly concerning for smaller businesses with limited financial reserves, as late payments can severely disrupt operations.
Around half of the businesses (52%) encounter late payments in less than 10% of transactions. However, nearly one in five (18%) report delays in a quarter of all payments, and 11% experience late payments almost half the time.
A lack of awareness is also prevalent, with one in ten businesses unaware of the frequency of late payments. This subsequently can hinder cash flow and profitability.
Cash flow issues are the primary reason for late payments, affecting 40% of businesses. Additionally, 29% attribute delays to worsening economic conditions.
Administrative errors such as failing to log invoices or invoicing mistakes account for 24% of late payments.
Manual invoicing systems can lead to human error, while technical issues cause 11% of delays. Alarmingly, 18% of delays result from customers intentionally delaying payments as a form of free financing.
According to money.co.uk business credit cards expert Joe Phelan, SMEs can enhance their resilience and protect their operations from the risks of delayed payments by implementing strategic planning and utilising financial tools.
“Using a business credit card effectively, for example, can be a lifesaver when payment schedules do not align. The key to this is thinking of the card as a short-term buffer rather than a long-term crutch,” Phelan said.
Small businesses should choose credit cards with extended grace periods, low introductory APR, and rewards to minimise costs, the executive said, adding that businesses can align credit card payments with income schedules to avoid late fees such as setting due dates after mid-month paydays.
The manufacturing industry faces the longest wait for payments, averaging 47 days. Complex supply chains contribute to these delays.
The wholesale and retail trade sectors, including motor vehicle repairs, and the agriculture, forestry, and fishing industries both experience a median wait of 36 days. These sectors often operate on thin margins and rely on credit.
The water supply, sewage, waste management, and remediation activities sector also faces a 36-day wait.
Long-term contracts with public sector clients often lead to slower payment cycles due to bureaucratic processes.
