Over 50% of businesses are paying suppliers late!
Over 50% of businesses are paying suppliers late!
Over 50% of businesses have confirmed that they have been paying invoices late due to cashflow problems.
External research has confirmed that the average payment has been 22 days late while up to 21% of businesses are paying suppliers over a month late.
Delays in payments are leaving smaller businesses at risk with their own cashflow and are having a knock-on effect on supplier payments.
Smaller suppliers competing with large businesses are most at risk as this effectively gives them financial instability with 2022 reporting over a third of UK businesses extended payment terms for suppliers, and the problem has only got worse. It is therefore becoming necessary for businesses to play ‘catch up’ on payments to reduce the pressure on suppliers.
Paying on time is also vital to secure business with suppliers and this is likely to mean that in-demand suppliers will become increasingly selective about who they work with, prioritising their customers of choice.
Not only are businesses at financial risk, but they are also at risk of being non-compliant if they do not make payments when due.
In a bid to reduce the number of late payments to small businesses the government is updating the Reporting on Payment Practices and Performance Regulations, and ‘broadening the powers’ of the Small Business Commissioner, who is responsible for the late payment regime.
Business secretary Kemi Badenoch said: ‘SMEs make up 99% of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that.
SMEs that are paid on time can do more business, scale up and make more profits, delivering growth for the economy.’
The Department for Business & Trade has estimated that timely payments to small businesses could lead to a £2.5bn boost to the economy and prevent a further 50,000 businesses from closing.
If you are having a problem with being paid late, or would like to discuss the terms that you have with your suppliers or clients, please give us a call here at Kennedys Accounting and we will be pleased to share best practice and talk to you with regards to this important matter for your business.