73% of small and medium-sized enterprises (SMEs) have some form of outstanding late payment from customers, leaving them £68,715 out of pocket on average, according to new research from Aldermore’s SME Growth Index.

The total value of late payments has declined from early 2023, falling by 55% from £152,606. However, outstanding balances still present a huge challenge for SMEs and nearly half (47%) felt that the amount they were owed on average had actually increased. This is potentially due to the cost-of-living crisis leaving many business leaders concerned about their cashflow, Aldermore said.

On average, SMEs are likely to wait 34 days for a late payment to be paid and spend nine hours of company time chasing outstanding amounts. This is an improvement from early last year, where SMEs were waiting 55 days for late payments, and spending 14 hours of company time following up on each outstanding payment.

Despite the improvements in late payments, over a third (36%) of businesses facing cash flow issues are having difficulties paying essential business costs as a result. Nearly a quarter (24%) face delays in making key investments, while one in five (22%) are missing out on opportunities for growth. Meanwhile, over a fifth (21%) 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: “While it’s positive to see late payments declining, there still needs to be a culture shift within the UK to reach a place where late payments are no longer the norm. It’s encouraging to see the government announce recent measures to tackle late payments through the Prompt Payment and Cash Flow Review and we hope this will mean late payments continue to decline, particularly at this critical time for the UK economy.

“Being paid promptly means SMEs do not need to spend valuable time chasing payments and instead can focus on investing in and growing their businesses, which we know is especially important when balance sheets are being tested. That’s why we offer SMEs flexible finance solutions such as invoice finance which can help them to quickly release cash into their business to give them quick access to the money they need to run and grow their company.”