60,000 businesses collapse and 250,000 jobs are lost as a result of late payment and non-payment of invoices, according to a recent report into the issue of late payment and survey of business leaders.
Research commissioned by Concur and undertaken by YouGov highlights the significant impact that late payment and non-payment has on SMEs. Of the 1,233 senior business leaders that took part in the survey, 28% said they had experienced late payment in the working week prior to taking part in the research and 46% suffer this at least once a month.
32% of the business leaders surveyed reported that they would suffer significantly in the event a major customer or client paid them late. This includes 17% saying that they would be unable to pay salaries, 21% would have to cease investment and 10% would have to significantly reduce commitment of resources to innovation.
The research also draws a clear correlation between late payment and employment practices, with a staggering 39% of respondents to the survey stating they would have to delay employing new staff by up to a year in the event a major customer or client paid them late.
Interestingly, the report highlights the vicious circle that arises from the problem of late payment. Whilst 46% of business leaders responding to the survey reported suffering late payment at least once a month, 27% admit to paying invoices late themselves, with some doing this so as to manage their own cash flow. It is however medium and larger sized companies that are the worst offenders, with 43% and 33% of these (respectively) paying invoices late at least once a month, according to the report. However, commentators believe larger companies are acutely aware of the importance of their smaller suppliers and are giving more attention to ensuring payments are made in a timely fashion. In the report, Philip King, Chief Executive of the Chartered Institute of Credit Management commented:
“There is an understanding that the supply chain is important and we’re seeing an increasing trend of large businesses recognising that it is in their interests- as much as the small business interests – for the supply chain to be working. And paying on time is one way of doing that.”
Business leaders taking part in the research reported that they spend, on average, 130 hours a year chasing unpaid invoices. For many business owners and managers already time-poor, investing time in chasing money that you legally owed can be a bitter pill to swallow and inevitably detracts attention from other key day-to-day and strategic business tasks.
It is for this reason many businesses opt to outsource the debt recovery process to a specialist firm of debt recovery solicitors. Not only do key staff at the business (owners, accounts staff and finance managers) save time, but a good solicitor will also be more effective in recovering the debt, and likely do so quicker.
Sam Bawden, Partner in charge of Holmes & Hills’ team of debt recovery solicitors commented:
Late payments can cripple small businesses and even cause serious cashflow problems for larger businesses where the outstanding amount is large enough. It’s important all businesses take a consistent, procedural approach to credit control, including undertaking due diligence, invoice issuance and debt recovery, whether carried out in-house or outsourced.”
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