#BWSMAGAZINE
THE INVOICE ECONOMY
FIVE WAYS THE ECONOMY IS
PUNISHING SMALL BUSINESSES
89% of public sector suppliers have been paid late, putting up to 3.5 million jobs at risk every year.
50,000 small and medium size businesses close each year because of late invoice payment
99% of businesses in the UK are SME’s and all of these are at risk from invoice late payment
SME’s are owed £26 billion in overdue payments
Northern Ireland paid 93% of invoices late last year
There were 5.7 million small and medium size businesses in the UK in 2017, making up 99% of
all businesses. Yet, these businesses are facing an ongoing problem: late invoice payments. On
average, 62% of small business invoices are now paid once already overdue. This delayed payment
has a huge impact on the finances of small businesses, putting jobs and businesses at risk.
paid late. East Anglia and East Midlands also
paid invoices late more than on time. Even the
fastest invoice payers, Scotland, only managed
to settle 53% of invoices on time.
SME’s are owed £44.6 billion in invoice late
payments
According to a recent study, SME’s in the UK
are owed £44.6 billion in late invoice payments.
Despite the recommended payment period
being 30 days, yet average payment takes an
additional 30 days. It is thought that if small
businesses were paid on time, the econo my
could be boosted by as much as £2.5 billion.
Small businesses are more greatly affected by
late payments as they may not have the ability
to pull together large sums in the event of late
payment.
For example, if a small business turns over £1.2
million a year and sales are £100,000 a month,
with the recommended payment terms of 30
days and everyone pays within that deadline
then the company needs to invest £100,000 in
working capital. However, late payments of just
15 days means the business needs an additional
investment of £50,000.
50,000 SME’s close each year because of late
invoice payments
The Federation of Small Businesses estimates
that 50,000 businesses close each year because
of late invoice payment. With 16.1 million people
currently employed by SME’s, making up 60%
of private sector employment in the UK this is a
very real concern. Annual SME turnover in 2017
was £1.9 trillion, making up 51% of private sector
turnover in the UK. The level of late payments
varies between regions, with Northern Ireland
the capital of late payments with 93% of invoices
70% of Medium sized SME’s rely on finance
In the Small Business Finance Report, the British
Business Bank found that despite 68% of small
business owners main aim being to pay down
debt, 40% are still using external debt.
With SME’s employing 16.1 million people in the
UK, which is 60% of private sector employment,
it is a concern that SME’s are often relying on
debt.
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