Over 3.6 million small and medium-sized enterprises (SMEs) in the UK are facing late payments, with an average of £96,772 owed per business, according to new research from Aldermore’s SME Growth Index.
The survey, conducted by Opinium in April 2024, reveals that 72% of SMEs have outstanding payments from customers, reflecting a significant rise in the total value of overdue invoices, which has increased by 41% since the end of 2023.
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The research also indicates that SMEs are now waiting an average of 46 days for late payments to be settled, up from 34 days last year. This delay is forcing businesses to dedicate more time to chasing debts, with the average time spent on follow-ups rising to 13 hours per payment, compared to nine hours in 2023.
The impact of late payments is increasingly severe, with 38% of SMEs struggling to cover essential business costs, and 36% facing difficulties in paying their own suppliers on time due to cash flow issues.
The domino effect extends further, with nearly a third of SMEs (31%) delaying key investments and 30% missing growth opportunities. Additionally, 24% of businesses report losing their competitive edge, as late payments hinder their ability to fund strategic decisions, such as hiring new talent.
Ross McFarlane, Commercial Director of Invoice Finance at Aldermore, emphasised the need for a cultural shift to address the persistent problem of late payments. He stated, "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."
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By GlobalDataMcFarlane expressed hope that the newly elected Labour government would implement measures to tackle this issue, allowing SMEs to focus on growth and investment instead of debt collection.
