- 90% of UK businesses affected by late payments with £42bn owed
- 15% unable to pay salaries as a result, 7% have made redundancies
- Almost 60,000 businesses collapse each year because invoices are not paid on time
A major new report warns of the risks of the ‘late payment culture’ UK businesses are having to live through, in turn threatening 350,000 jobs a year. Businesses are being forced to take radical action to protect cash-flow, due to the number of invoices being paid late. If their biggest customer were to pay late, companies would be faced with the following consequences: forced to make redundancies (7%), stop planned investments, (17%), not paying salaries (15%) and significantly reducing innovation spend (10%).
Concur, the world leaders in employee spend management, released the report showing that 40% of UK businesses said they received a late payment in the last month, a trend which could undermine job creation.
High volumes of late payments are significantly worrying when 57,960 business failures (23% of the total number of business that go bust every year) are currently caused by late payments.
In devastating news for the UK’s thriving businesses community, the research discovered that medium-sized businesses (50-249 employees) were the hardest hit by late payments, dispelling the myth that the smallest companies are often worst hit.
The poll revealed that 21% of medium sized businesses, in particular, said they would have to stop planned investment, 14% saying that they would not be able to pay salaries and 15% significantly reducing innovation spend. Most worryingly, compared to 6% in small businesses and 8% in enterprise, 11% of medium sized companies said they would also be forced to make redundancies.
Small and micro businesses, often not cash-rich, have the agility and flexibility to make strategic decisions when it comes to cash flow. And of course, enterprises more often than not have a ‘cash cushion’ available to bail them out in difficult situations. But for the mid-market, they have reached a position where they need to keep salaries and expenditure consistent, meaning they lack the same agility, but may be operating at a relatively slim margin in comparison to bigger players. This is crucial information about what oft-forgotten middle of our economy.