It may seem like a silly question, but businesses earning less than £1 million wait on average 72 days for invoices to be paid. That’s more than 2 months!
That’s a long time to wait for money you’re owed. Especially when you need that money to effectively run your business.
UK SME’s are owed an estimated £44.6 billion in late payments and the effects can be deadly.
Late payment for goods or services was a primary or major cause in 23% of corporate insolvencies in 2016.
There are many reasons it’s important to keep an eye on unpaid invoices, below are just a handful of them.
Unable To Predict Future Earnings
Although it makes absolutely no economic sense, 27% of all invoices are paid late in the UK.
On top of the average wait of 72 days, it can be hard for businesses to know how much they’ll be earning month on month.
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57% of businesses admitted to delaying payments intentionally. Plus 67% use payment terms to strategically manage their own finances.
It only takes one particularly bad month to land your business into trouble.
Unable To Pay Bills
Did you know that 39% of UK SMEs spend up to 4 hours a week chasing late payments? Worse still, 12% employ someone to solely chase outstanding invoices.
When you’re having to wait 2 months for them to be paid, you need the funds to even pay the staff used to chase the payments!
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According to Xero, small businesses face bills of over £2 billion just to chase customers.
Ironically, late payments from your customers can lead to you yourself not being able to pay invoices for goods and services. It’s a vicious circle.
Unable To Pay Staff
With an increased risk of non payment from clients, your business may be placed into a position where you simply cannot afford to pay for your staff.
In the first quarter of 2018 the UK saw over 96,000 redundancies. Large contributions to this amount came from; the collapse of Carillion, the close call with Homebase and new partnerships with John Lewis.
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Larger companies don’t feel much impact with the loss of thousands of staff. But a small team of 10 will certainly feel the loss of even just one individual.
Always make sure that you pay your staff before you pay yourself. If you’re still struggling then you may need to offer volunteered redundancies.
What You Can Do About It
If you’re one of the thousands of UK SMEs struggling to get payment from clients then you may want to have a think about investing in invoice finance.
With this service you can get 85% of each invoice funded as soon as they are raised. This means funds within 24 hours, as opposed to 72 days.
Better still, we will even take over the debt recovery process for you. So you can save on average 4 hours a week and spend it on more important tasks.
At CCC Finance we can also credit check potential clients for credit worthiness. If you’d like to find out more about what we offer then please get in touch by calling our team on 0845 468 6423 or email us directly at firstname.lastname@example.org.
Feature image credit: Andriy Popov via 123RF