Late payments fuelling cash flow crisis among SMEs

Late payments are fuelling a cash flow crisis in the wake of the coronavirus pandemic, a major study has revealed.

The research, published by Barclays, suggests that big businesses are preventing the smallest firms from growing by not paying them on time.

According to the report, three in five (58 per cent) small and medium-sized enterprises (SMEs) are currently waiting on payments from customers.

This rises to more than nine in 10 (94 per cent) when including only medium-sized firms – defined as those with 50 to 249 employees.

The survey of 500 business owners suggests that late payments are preventing new hiring opportunities, investment into their business, and a cash flow crisis. Previous research found that disrupted cash flow could be behind as many as one in two business insolvencies in the UK.

The study also reveals that two-fifths (39 per cent) of business owners say their mental wellbeing has suffered as a result of late payments, while one in four (25 per cent) haven’t been able to go on holiday because of money owed to their business.

Commenting on the findings, Hannah Bernard, Head of Business Banking at Barclays, said: “Late payments is the single biggest cause of business failure. We want to unite the small business community in tackling this issue and raise the social conscience of larger businesses who don’t pay on time.

“Having a constant cycle of late payments will hamper the future growth of the economy, and fuel a never-ending cycle of uncertainty for hard working entrepreneurs. Business owners across the UK have a lot of challenges to juggle right now, and the stress of chasing late payments shouldn’t be one of them.”

The research comes after the introduction of the reformed Prompt Payment Code, which allows suppliers to claim late payment interest and compensation, providing the customer has signed up to the code.

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