SMEs face an annual deficit of £50,000 a year due to unpaid invoices

SMEs face an annual deficit of £50,000 a year due to unpaid invoices

Date27 May 2015
Posted ByAdmin

Last week, new research from MLP Law revealed how small and medium businesses across the UK are losing thousands of pounds annually as a result of unpaid invoices.

The law firm found that almost 64% of the small businesses surveyed were owed up to £15,000 a year in overdue invoices. The research, carried out to understand the extent of the problem concerning cash flow, also revealed that 4% of SME owners experienced deficits of more than £50,000 a year due to unpaid bills.

According to BACS (the organisation behind direct debits), the UK SME sector as a whole faces annual shortfalls approaching £8.2bn as a direct result of unpaid invoices.

Unpaid invoices are detrimental to a business with almost 50% of small business owners confirming that they experienced unpaid invoices once a month. Close to 52% said that they were forced to write-off up to ten invoices each year simply as a ‘bad job’.

The most common consequences of unpaid invoices were cited as cash flow problems (84%), inability to pay employees and suppliers (36%), stunted business growth (12%), and strained relationships with suppliers (21%).

Tristan Duncan, partner at MLP Law, said: "The old 'cash is king' notion couldn’t ring truer here.  SMEs are the backbone of the UK's economy and cash flow is clearly a huge issue for them. A healthy cash flow is the key to a successful business and when it slows, businesses can fail.”

He continues, "While there is legislation in place which actually helps businesses to be paid on time, sadly many SMEs still face huge problems when trying to reclaim what is rightfully theirs, especially from large corporates."

According to Alan McCappin, Practice Manager at Bradleys Accountants, “Small business cashflow depends on prompt payment. Thus it would be advisable to put a credit control process in place to ensure that SME owners don’t get to that stage where they have to explore legal options.”

We understand that the nuisance of late payment has a negative impact on your business and its finances, but unfortunately, dealing with late-paying customers is part of running a business. Take note of the tips we’ve put together in this article to find out how to handle your debtors effectively