OnePoll survey shows UK small businesses struggle with late payments but online accounting tech firm Xero says users can buck the trend by speeding-up cash collection

More than half (54%) of UK SMBs are concerned about their cashflow, with late payments in particular causing challenges for 29%, a survey of 500 SMB owners conducted by OnePoll on behalf of Xero has found. A fifth (20%) said having to invest or reinvest in their business had made a big impact on their available finances.

The survey confirmed that cashflow generation was one of the biggest barriers to running a new business, along with competition from established firms (31%). However, latest Xero analysis shows that technology can play an important role in speeding-up cash collection. It found that UK businesses that use online accounting are getting paid an average of 36 days after invoicing their customers – 23 days faster than they were in 2011.

“Cash availability really can be make-or-break for small firms, which is why it’s critical to keep a close handle on invoicing and accounts,” said Xero managing director Gary Turner. “Earlier this year, the International Monetary Fund disclosed that the UK was the fastest growing economy in the developed world in 2014. Rather than limping along financially, if more small businesses succeed in improving their cash collection, just imagine what this could do for their growth and that of the wider UK economy.”

In addition to cashflow generation, UK entrepreneurs also pointed to access to funding (26%) and managing finances (17%) as restrictive. Owners of businesses that were started between 2000 and 2007 were the most concerned about cashflow (67%), while those who set up in the 1980s were least worried (35%). Despite these challenges, the overwhelming majority of UK small businesses polled were profitable (84%) and of these, 34% had been from the outset.

Esther Thompson, founder of Tea Huggers, an award-winning provider of herbal teas, has been using cloud accounting to gain a better overview of her case flow. She said: “Having real-time financial data to manage your cashflow is so important. At the end of the day, that’s the critical side of the business. If you’re not making money then the company’s not going to be viable.”

Turner continued: “With online invoicing, small business owners can send invoices from a mobile device and with automated bank feeds, they can regularly check their accounts and stay on top of collections,” added Turner. “In this respect, cloud accounting software is a vital tool in speeding-up payments.”

Top tips from Xero on getting paid on time, invoicing efficiently and having more cash flow:

Tip #1: Discuss payment terms before you get started
Getting this sorted upfront means that there is no confusion down the track. It also sets the client’s expectations around payment before you start the work.

Tip #2: Keep detailed records of inventory and time
This saves time when it comes to creating the invoice and makes sure you don’t miss anything. It also means if things are going over budget you can let your client know, instead of sending them an expensive surprise at the end of the month.

Tip #3: Make the invoice clear and easy to understand
List the details of the job in a way that makes sense to the client; any confusion could create a payment lag. It’s also good to personalize your invoice with your business logo – it helps carry on the professionalism of your work. Ensure you bank details are on the invoice so you can be paid.

Tip #4: Keep on track with debtors
The squeaky wheel gets the oil. When things become overdue, send reminders, monthly statements or make a phone call. It will help remind your client that you are serious about getting the invoice paid. Having a process that helps streamline invoicing can reduce the amount of time you spend collecting your hard-earned money