Nearly a quarter of small and medium-sized businesses surveyed are facing a potential financial crisis due to late payment of invoices, according to research.
A survey of 1,000 SMEs by Tungsten revealed half of all invoices are overdue, with the average SME owed £40,857 from unpaid invoices with £20,937 of that figure late.
Of the companies surveyed, 23 per cent said late payments have put them at risk of closure. The issue was worst in the technology sector, where almost a third of all businesses (32 per cent) had been affected financially by late payments from customers.
Just under a quarter (22 per cent) said most late payments were from large businesses, medium-sized firms were responsible for late payments for 11 per cent of respondents, while 8 per cent of respondents identified the public sector as being responsible for late payments. Around a third said there was no clear pattern.
Tungsten chief executive Richard Hurwitz said: “An unpaid invoice can mean the difference between a successful month of trading and a dangerous financial shortfall. In the worst case it could lead to insolvency.”
Hurwitz said plans to create the new role of small business commissioner showed the UK government was taking the problem seriously, but said there was more to do.
Paper invoicing raises many difficulties for businesses including a lack of flexibility and a higher risk of human error or invoices getting lost. By moving the invoicing process online, technology is providing flexibility and visibility to both businesses and their suppliers, as well as reducing fraud and limiting the room for mistakes.
Taking steps toward prompt payments and the increasing uptake of technology is helping to grease the wheels of the supply chain and allowing businesses to do business.
“Sometimes buyers will wait until the last day before the invoice is due only to tell their supplier that it is missing vital information,” he said. “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.”