Quarter of UK SMEs at risk due to late payments

A new report highlights the dangers faced by small businesses because of cash flow problems caused by late payments.

The newly published research from the Tungsten Corporation warns that as many as a quarter of UK SMEs may be at risk of insolvency.

Crisis

Tungsten Corporation's research revealed the potential cash crisis could, in the worst cases, be bad enough to affect the whole viability of some firms.

The survey found that the average SME has £40,857 outstanding in unpaid invoices with £20,937 of that total overdue. Taking into account the UK has 5.2 million SMEs, a total of £212bn could be waiting to be paid.

The survey included 1,000 companies, 23% of which stated that they had been under risk of closure due to delays in receiving payments that were due.

The technology sector was found to be the most risky with almost a third of businesses operating in it reporting that they had been negatively impacted by customers who made late payments.

Customers

The survey also found that there was no typical 'late paying customer'. Of those companies that took part in the survey, 22% said the majority of their late payments were from dealings with large businesses, while 11% cited other medium-sized customers as the most common late payers. Only 8% said that public sector customers were guilty of late payment.

Overall, 33% of businesses in the survey could not identify a particular pattern.

"These figures are a telling reminder of the challenges faced by SMEs in this country. 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," commented Tungsten CEO Richard Hurwitz.