More that 3.6 million (72%) small and medium-sized enterprises (SMEs) have some form of outstanding late payment from customers, leaving them £96,772 out of pocket on average, according to new research from Aldermore’s SME Growth Index.
The total value of late payments has increased from the end of 2023, up 41% from £68,715. Outstanding balances continue to present huge challenges for SMEs.
On average, SMEs are likely to wait an extra 46 days for a late payment to be settled and spend 13 hours of company time chasing outstanding amounts. This is an increase from last year, where SMEs were waiting 34 days and spending nine hours of company time following up on each payment.
The increase in late payments has a domino effect on SMEs. Over a third (38%) of businesses are having difficulties paying essential business costs and 36% are struggling to pay their own suppliers on time as a result of cash flow issues. This represents an increase in figures from 2023.
31% of SMEs face delays in making key investments as a result, while 30% are missing out on opportunities for growth. Meanwhile, 24% feel they are losing their competitive advantage, as they’re unable to fund strategic business decisions, such as hiring new talent.
Ross McFarlane, commercial director of invoice finance at Aldermore, said: “With late payments continuing to be a problem for SMEs, it’s a reminder that a culture shift is needed in the UK where late payments are no longer acceptable. With a new Labour Government in place, we hope the measures the government previously announced to tackle late payments can be implemented to help SMEs.
“If SMEs are paid promptly, it removes the time they currently need to spend chasing payments and instead they can use this time to focus on investing and growing their businesses. It also releases much needed cashflow from unpaid invoices which is particularly important given the current high interest rate environment. At Aldermore, we offer SMEs flexible finance solutions such as invoice finance to help a business quickly release cash allowing them to access the money they need to run and grow their company.”
