According to a recent survey, small businesses in Sheffield are the most at risk from late payments – but there are vast differences according to where in the country a business is based. One thing is for sure, however, regardless of your location, late payments are still causing a headache for small businesses.
Analysis by FreeAgent has revealed that only around half of all invoices sent by small businesses last year were paid on time. Interestingly, the best and worst cities for payment were just 40 miles apart, with around 79% of invoices being paid on time in Manchester, compared to only around 29% in Sheffield .
There is good news for businesses based in Leeds, St Albans and Coventry, who were closely behind Manchester with 76%, 67% and 61% of invoices being paid on time respectively. However, the picture is less encouraging in Peterborough (37%), Twickenham (37%) and Northampton (38%).
The knock-on effects of not being paid on time, even by a few days or weeks, can be significant for small businesses, in particular. For example, this can result in a business paying its own suppliers late, or even impact upon its ability to pay staff. Furthermore, both time and resources, which are often limited in small businesses, are often diverted to chasing late payments, when they could be better employed for the business elsewhere.
Cash flow remains the biggest “killer” of small businesses. The Federation of Small Businesses believes that if businesses paid their suppliers on time, 50,000 business “deaths” could be avoided each year. Earlier this year, the Government began implementing measures to try to help small business, in the form of regulations to force large companies and LLP’s to publicly report their payment practices on a bi-annual basis, and the appointment of a Small Business Commissioner. However, if real change is to occur, we need to see more of a cultural shift in payment practices, as well as new measures from the top.
If you would like further information on this, or if you would like advice for your business, please contact Kelly Mills and the team at DMH Stallard using the details below.