Over half of UK small businesses are still owed money from 2022
Late payments are a common problem for businesses of all sizes, but they can be especially challenging for SMEs. Interruptions to cash flow caused by unpaid invoices can have significant repercussions on the smooth running of a business, from covering day-to-day expenditure to paying employees. Unfortunately, a new survey from NerdWallet has revealed that over half (55%) of SMEs in the UK still have outstanding invoices from the previous tax year (2022/23).
The problem seems to be getting worse, as nearly half (46%) of businesses have more unpaid invoices now than they did the previous year, meaning SMEs may have to make cutbacks on spending, recruitment and even staffing.
The survey found that most unpaid invoices were less than a month overdue (35%), but shockingly, 20% of business owners said they had outstanding invoices from four to six months ago. These late payments can have significant repercussions, with 39% of SMEs saying they have had to make reductions to their overheads, including downsizing office spaces. Additionally, 28% of SMEs paused recruitment efforts due to unpaid invoices, and 22% of small businesses had to make staff redundancies to compensate for their late payments.
The survey also revealed that most business owners typically waited a week before taking action for unpaid invoices. Half of the respondents said they sent reminders every week until invoices were paid, while a quarter pushed for payment every day. An additional 40% followed up failure to pay with a phone call or letter. Only 23% of respondents charged interest on top of the agreed amount for each reminder, while just 11% claimed debt recovery costs.
Fourteen per cent of businesses had to use a debt collection agency to receive payment, while 8% wrote off the invoice altogether. Most shocking of all, 22% of small business owners were happy to wait and do nothing while the client withheld payment.
If you’re struggling with unpaid invoices, it’s important to take action quickly to avoid further interruptions to cash flow. Sending regular reminders and following up with phone calls or letters can help, but it’s also important to be aware of legislation surrounding repayments and to charge interest on late payments to compensate for the inconveniences caused by overdue invoices.
Outsourcing the collection of overdue invoices to a debt collection agency can help to get paid more quickly and protect your business’s financial health. Their knowledge, expertise and resource means they are well equipped to deliver successful outcomes for businesses, and the fact they typically work on a success-only basis provides additional peace of mind.
Click here to get a debt recovery quote, or call 0800 9774848 to discover how Hilton-Baird Collection Services can help.