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

/ Posted By - Bradleys Accountants / Categories - Accounting news

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’.

    Subscribe to our newsletter

    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.

    Related Articles

    Everything you need to know about moving…
    | Accounting news

    Ever since HMRC announced basis period reforms, there has been much discussion and confusion around … Read more

    What does the Spring Statement 2022 mean…
    | Accounting news

    Rishi Sunak tinkered with a few items in his most recent Spring Statement on March … Read more

    Claiming CIS deductions faces changes from April…
    | Accounting news

    From a tax and legislative compliance perspective, 2021 was a busy year. The added burden … Read more

    X

    Subscribe to the newsletter

    Know about latest accountancy updates, company news and business growth tips. Every month, in your inbox

      Subscribe to our newsletter