Small businesses owed nearly £21k in unpaid invoices

As the new Small Business Commissioner (SBC) starts her role this week to tackle late payments, research shows the issue is having a big impact on small businesses.

Research from Purbeck Insurance Services has revealed that late payments are causing significant cash flow problems. So much so that UK businesses are owed between £18k and £22k in unpaid invoices.

This growing burden not only disrupts day-to-day operations, but also threatens long-term growth, investment, and even survival for many small firms across the country.

How much are SMEs owed in late payments?

Late payments remain a major pain point for UK SMEs, which typically have smaller cash reserves than larger rivals. Now, the new research from Purbeck Insurance Services shows just how widespread — and costly — the problem is becoming.

According to the survey, 77% of UK businesses are today owed money by late-paying customers, which can cause problems throughout the supply chain. 

Smaller companies are the most troubled by the problem. Companies with 10-49 employees are owed £20,973 in payments, on average. Meanwhile, micro businesses (less than 10 employees) are missing out on an average of £8,441 in unpaid invoices.

However, medium enterprises (100-249 employees) seem to have the largest late payment bill, as they were reported to be owed, on average, £22,102.

Regional differences are also evident. The report also found that businesses based in Greater London, Scotland, and the West Midlands are owed the highest amounts, with firms in these locations currently chasing an average of  £21,000 in late or delayed payments.

How are late payments affecting SMEs?

Unsurprisingly, the high amount of unpaid invoices is causing significant financial strain for companies across the UK. 60% of SMEs say that late payments affect their business. According to ABC Money, this leads to a total loss of £2.5bn every year.

Purbeck’s survey also reveals a gender pay gap between male-led and female-led businesses. Specifically, it found that male business owners are owed £17,997 in unpaid invoices, whereas female founders are owed an average of £15,592.

These are issues that the new SBC, Emma Jones, aims to address. Jones, who is the founder of Enterprise Nation, took over from the previous SBC, Liz Barclay, this week. 

Commenting on her new position, Jones says she aims to “make life easier for small business owners by leveraging technology to speed up payments and access to support.”

How can businesses protect themselves in the meantime?

Amid these ongoing challenges, Todd Davison, Managing Director at Purbeck, offers practical advice for SMEs to protect their cash flow and stand their ground with customers who pay late.

Davison advises that company owners “keep on top of invoices, chasing payments as soon as they are two or three days overdue, and consider exercising their legal rights by charging interest on overdue invoices and charging late payment fees.”

In other words, Davison urges bosses to be proactive and assertive in tackling late payments, so as to minimise cashflow disruption as quickly as possible. 

We’d also suggest firms firmly communicate with new partners that late payments won’t be accepted. This not only helps businesses recover owed funds more quickly, but also discourages clients from delaying payments in the future.

As far as possible, resist delaying payments yourself. Davison points out that it’s unfair for any company to delay paying their suppliers just to manage its own cash flow problems, as it puts unnecessary pressure on the entire supply chain. 

“Ultimately, every business has seen its costs rise,” he adds. “Using a supplier to buoy up your own finances is both unethical and hugely damaging to our SME community.”