Research reveals SMEs owed suppliers nearly £50bn in unpaid bills

Research reveals SMEs owed suppliers nearly £50bn in unpaid bills

Research released by accounting software Xero puts the average amount owed by SMEs to suppliers at £8,811. Combined with the 5.6m SMEs in the UK, it amounts to £49,341,600,000‬.

The research also revealed a domino effect as the UK SMEs in turn, struggle to receive payments due.

UK SMEs are owed an average of £23,360 in late payments on any given day, a 17% year on year increase.

“It has a huge impact on the economy,” says Donna Torres, director of small business at Xero. “If small businesses don’t get paid then they’re also potentially not paying their suppliers. That’s a huge concerning number which obviously hits the economy and slows it down – it’s really worrying.” 

The research also found that under half (48%) of invoices issued by small businesses are paid late, and as a result a quarter (26%) of small business owners struggle to pay their own suppliers on time. 

“What’s also quite sad is that late payments also have an impact on SME owners’ wellbeing, how they feel about running their business and how that then could put off prospective entrepreneurs; it’s sad that small businesses feel isolated,” says Torres, adding 43% of business owners said that late payments caused them sleepless nights and affected their mental health (44%).

76% agree their business feels more “worth it” without cash flow problems, and 37% have considered closing down their business because of cash flow issues relating to late payments.

SME owners have also turned to desperate funding to make up the late payment shortfall, with 52% using money from personal savings or from friends and family.  

“Accountants can help support small businesses with these difficult conversations.” – Xero

“Chasing up cash flow is not a conversation small businesses find easy,” says Torres, “that’s not why they started up their business. Small business owners aren’t using the tools that help them nor are they sending reminders or picking up the phone. Accountants can help support small businesses with these difficult conversations.

Xero has recently teamed up with payment giant, PayPal, to speed up invoice payments, by up to 21 days in some cases. 

“We have been working closely with Xero to try and find solutions to help businesses get paid faster,” said Nicola Longfield, director of small and medium business at PayPal UK. “Late payments sap both time and money, and prevent a business owner from investing in the technology, staff or stock needed to sustain and grow their business.”

But Xero’s Torres appreciates technology alone is not a one fix saviour.

“The Xero Paypal tool is not going to suddenly fix it overnight,” she says, “but it can help them set reminders while PayPal adds instant payouts. It’s just small things that build up that can really help small businesses get paid.” 

To find out more about how late payments are affecting small businesses read the full report here.

Whitepaper

The Future of Finance is in the CFO's Hands

Business The Future of Finance is in the CFO's Hands

3m
Save a Week a Month Consolidating Accounts

Accounting Software Save a Week a Month Consolidating Accounts

4m
Mitigating Risk Through Internal Control

Legal Mitigating Risk Through Internal Control

4m
Could tax season have run more efficiently?

Corporate Tax Could tax season have run more efficiently?

5m

Related Articles

How to optimise your practice for the future

Accounting Software How to optimise your practice for the future

7d Wolters Kluwer | Sponsored
Sage announces £40m tech boost for North East

Accounting Software Sage announces £40m tech boost for North East

2w Dave Beach
CEO of Barclaycard Payments: CFOs nervous in “confusing” tech market

Accounting Software CEO of Barclaycard Payments: CFOs nervous in “confusing” tech market

4w Dave Beach
“Businesses are better with an accountant”

Accounting Software “Businesses are better with an accountant”

2m Beth McLoughlin, Managing Editor
Chatbots and the AI-assisted audit revolution

Accounting Software Chatbots and the AI-assisted audit revolution

2m Tim Deeson, CEO & Founder GreenShoot Labs
Keeping ahead of Making Tax Digital: Bookkeeping Software for 2019

Accounting Software Keeping ahead of Making Tax Digital: Bookkeeping Software for 2019

6m Chrissy Chiu
How technology is changing the face of accounting

Accounting Software How technology is changing the face of accounting

8m Beth McLoughlin, Managing Editor
The impact of late payments on small businesses

Accounting Software The impact of late payments on small businesses

8m Beth McLoughlin, Managing Editor