New data released by Xero has shown that the average small business in the UK is owed £24,841 in overdue payments on any given day, and 78% of the businesses were owed money outside the agreed payment terms.
Xero analysed the data from the businesses using its bookkeeping software in the UK to come up with these rather worrying cash flow statistics. The data covered two million invoices issued through the software and showed that in August 2018 invoices issued on 30 day payment terms were paid after 39.67 days, almost ten days late.
Of those invoices that went past the 30 day terms, the average payment date was 64 days after issue, more than double the stated terms.
Edward Berks, EMEA director, platform business at Xero, said: ‘At a time when the world needs small business to succeed it’s estimated that 50,000 businesses in the UK fail each year because of cash flow issues.
‘Our data shows the impact that this level of debt can have on small companies. Predicting working capital requirements still remains a challenge for small businesses and accessing finance remains expensive and time consuming.
‘But, it is increasingly critical that the government and industry takes the right steps to ensure that small businesses get paid faster.
‘New measures to crack down on big business culprits and smarter technology to automate payments will all help to alleviate the pressure on small business cash flow.’
We have posted previously on how key cash flow is to small businesses and given tips on how to improve it, but clearly more needs to be done to improve the situation.
The department for business, energy and industrial strategy (BEIS) has been looking into the situation, having collected evidence across November and will reporting its findings and suggestions next year. Until then businesses will need to learn how to best protect themselves from delayed payments.