Total Business Magazine

Late Payments Force More Than Half of SMB Owners to Use Emergency Finance

SMB owners say late-payments are a bigger concern than Brexit.

New research from GoCardless, the recurring payments specialist reveals that 56% of UK business owners have had to use personal or emergency finance to pay for business expenses due to late payments. Findings from the study also report that delayed payments are directly impacting businesses with the added consequence of producing a negative ripple effect from one business to another.

Responses show that late payments are an ongoing battle for SMB owners, with 80% stating that they “couldn’t be sure they’ll be able to pay their bills on time” due to unpaid invoices negatively impacting cash flow. Findings also affirm that 41% of SMB owners are more concerned with late-payments having a negative effect on their business than Brexit. Further to this, managing cash flow and certainty on payments is so important that 54% of SMB owners state guaranteed on-time payment is better than sex.

According to the Federation of Small Businesses’ report, £6,142 is the average value of late payments, and on-time payments would generate £2.5 billion for the UK economy. The same report shows a boost in finances from on-time payments would have saved 50,000 UK businesses from failing.

Hiroki Takeuchi, CEO & Founder of GoCardless comments: “It’s unacceptable for small business owners to have so much uncertainty around their payments. When late-payments are resulting in founders taking emergency finance or not being able to pay their bills on time, it’s time to do things differently. Currently, only 43% of SMB owners are using tech solutions to ensure they’re paid on time.”

He adds: “Direct Debit is a great way for businesses to tackle late payment culture by guaranteeing more certainty around when they get paid. Business owners should be able to focus on running and expanding their business, not spending days chasing unpaid invoices.”

Steve Leighton, Founder of Has Bean Coffee was working at an all-night petrol station before following his passion for coffee and opening an independent coffee wholesaler. Speaking on his first-hand experience of delayed payments hindering his operations, Steve adds: “Customers paying invoices up to four months late drove us crazy. Now we can automatically take payment when issuing invoices.”

Peter Czapp, Founder of The Wow Company, an accounting firm that advises SMBs, says: “If you can get 75% – 80% of customers paying by Direct Debit – you can just sleep better at night. This tactic helps small businesses to pay staff on time and invest in the business.”

(Source: GoCardless)

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