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UK’s smallest companies have to wait 71 days to be paid by larger corporates

by Scott Brown | Aug 27, 2014
  • Recent research by the Asset Based Finance Association (ABFA) reveals that small businesses in the UK have to wait an average of 71 days to be paid by their corporate customers - 23 days longer than the waiting period of the country’s largest businesses.
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    Today, businesses earning under £1 million per year end up waiting, on average, a full week more for payment than the 64 days they had to wait in 2006 (prior to the onset of the 2007–2012 global credit crunch). By contrast, the UK’s largest businesses (those with a turnover of more than £500 million) are paid within 48 days.

    According to ABFA, which represents the asset-based finance industry in the UK and the Republic of Ireland, the global recession has given high-paying customers leverage over their (smaller) suppliers to protract payment terms. Jeff Longhurst, chief executive of ABFA, believes that these figures “highlight that the relationship between some big businesses and smaller suppliers has become even more unbalanced since the credit crunch – and Government efforts to address this have not had a great deal of impact.”

    To be fair, the British government has successfully encouraged many big businesses to adhere to the Prompt Payment Code, set up in 2008 to help small businesses recover late payments. However, Longhurst believes that not enough has been done to chase up on these guilty parties.

    For SMEs, the effects of a late payment can be devastating.

    "It is alarming to see how much longer SMEs are waiting to receive payment compared to just a few years ago. It is putting some SMEs in financial difficulties, and it certainly makes it more difficult for SMEs to make the investments in staff and equipment they need to respond to the recovering economy", says Longhurst.

    The reasons for late payment are as diverse as the businesses themselves. Matthew Malloy, Accountant and Client Manager at Sable Accounting, identifies the six most common excuses behind the late payment of these invoices:
    1. Chain reaction: Customers sometimes find themselves in the position where they are forced to wait for payment from another party before they are able to pay the client back.
    2. Lost invoices: It's not uncommon for invoices via email and post to be lost in transit.
    3. Errors: Sometimes, invoices contain errors that need to be disputed, necessitating further delay.
    4. Purchase order number: If an invoice does not make reference to a purchase order number, it will not be accepted.
    5. Absent parties: If the person who authorises payment is not in the office or is on holiday, payment is delayed. This happens more often than you think.
    6. Issues with cheques: Cheques are notoriously unreliable forms of payment, and tend to go missing all too frequently.

    One of the biggest challenges facing SMEs is following up on overdue payments, which is why an experienced accounting firm should give you, whether you are a contractor or small business owner, the option to invoice customers on your behalf and chase up on your debtors. Rather than simply running your bookkeeping for retrospective information, a reputable firm will be proactively involved in the management of the finance function itself.

    If you find yourself in a similar situation to the above, Malloy advises that you do have a legal right to start charging interest on overdue invoices prior to escalating the situation in the Small Claims Court. For more information, read our sister company's article on the Late Payment of Commercial Debts (Interest) Act 1998.


    Our clients range from startups to businesses turning over upwards of £5 million per annum. Since 1995, we've worked with small to medium-sized businesses, contractors running their own service companies, private individuals, and self-employed contractors. For more information, please give us a call on + 44 (0) 20 7759 7553 or email accounting@sableinternational.com.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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