Late payments 'creating insolvency risk for UK SMEs'

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Late payments 'creating insolvency risk for UK SMEs'

Small and medium-sized enterprises (SMEs) in the UK are facing a potential financial crisis due to the persistent problems caused by late payment of invoices.

A new report conducted by Tungsten Corporation has surveyed 1,000 companies, finding that the average SME is owed £40,857 in unpaid invoices, with £20,937 of that total being overdue.

Indeed, 23 per cent said these late payments have put them at risk of closure, with the issue being most pronounced in the technology sector, where 32 per cent of businesses reported having been impacted financially by overdue payments from customers.

When considering the UK's 5.2 million SMEs, as much as £212 billion could be owed in total, which creates a significant financial liquidity issue that jeopardises the growth of the country's smaller businesses.

The report also revealed that this issue is a widespread and broad-ranging one, with 22 per cent of those surveyed saying most of their late payments were from large businesses, whereas 11 per cent said they were having problems with medium-sized firms and eight per cent identifying the public sector as being responsible for late payments.

A further 33 per cent of businesses surveyed said there was no clear pattern to the non-payment, but the outcome remains the same: the risk of a potentially dangerous financial shortfall that could lead to insolvency.

Richard Hurwitz, chief executive officer at Tungsten, said: "There are many reasons for late payment. Sometimes buyers will wait until the last day before the invoice is due only to tell their supplier that it is missing vital information. This creates unnecessary delays.

"Advances in technology mean that many payments can now be processed electronically, which ensures invoices have all the necessary information, but e-invoicing was only used by a quarter of the small businesses we spoke to."