Late payments to UK SMEs have doubled from 12 days in 2018 to 23 days in 2019, according to the latest analysis from MarketFinance Business Insights.
Invoices paid late were also typically larger in value (£34,286) than those paid on time (£24,624).
The analysis charts late payment trends between 2013 and 2019, analysing over 100,000 invoices. It sheds light on how long SMEs are waiting to be paid, how late the payments were and the impact of this.
Results from the analysis show businesses typically agree 45-day payment terms from completion of work or delivery on goods.
However, almost 39% of invoices issued in 2019 worth over £34bn, were paid late. This is a small improvement from 2018 where 43% of invoices were paid late.
Over a six year period the analysis found larger debtors insisted on longer payment terms than smaller debtors.
When invoices were paid late the larger debtors settled much later at 94 days compared to smaller debtors at 42 days.
Bilal Mahmood, external relations director at MarketFinance said: “It’s great to see that fewer invoices were paid late in 2019 but worryingly, those that were paid late took twice as long as in 2018, up from 12 days to 23 days. Late payment practices harm business cash flow, hampers investment and, in extreme cases, can risk business solvency.
“Separate research we’ve conducted highlighted that 87% of businesses are prevented from taking on more orders because of the cashflow constraint owing to late payments. Overall it seems who you are doing business with and where they are based is important to know for a small business if they need to forecast cashflow.
“Government measures such as the Prompt Payment Code and Duty To Report have helped create awareness but need more bite. Until this happens, there are ways for SMEs to fight back against the negative impact of late payments, from having frank discussions with debtors that continuously fail to adhere to agreed payment terms, to imposing sanctions on those debtors, or seeking out invoice finance facilities to bridge the gap,” he added.
Professional and legal service businesses suffered the most with late payments in 2019.
Some 70% of invoices were paid late which is up from 30% in 2018. Manufacturers (57%), retailers (49%) and creative industries were also impacted by late payments of invoices.
The biggest improvements in late payment practices were in the North West with 63% in 2018 vs 37% in 2019.
The North East also showed improvements from 60% in 2019 and 40% in 2019, and Scotland with 62% in 2018 and 38% in 2019.
Bilal Mahmood said: “SMEs owners have come to expect long payment terms but late payments are inexcusable. For every day an invoice is late, it’s more time spent chasing payment. This means less time for business owners to focus on growing their business, coming up with innovative ideas and hiring more people, or just paying their staff and bills. Things need to change quickly.
“We want the UK to be the best place in the world to start and grow a business, but the UK’s small-to-medium-sized businesses are hampered by overdue payments. Such unfair payment practices impact a business’ ability to invest in growth and have no place in an economy that works for everyone,” he concluded.