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Late payments to firms have doubled over the last 12 months

By Marianne Curphey

UK businesses are having to wait twice as long to be paid and larger companies are the worst payers

Late payments to UK small and medium sized firms have doubled over the past 12 months, rising from 12 days in 2018 to 23 days in 2019.

In a snap shot of a struggling economy, data from MarketFinance, which analysed over 100,000 invoices, found that 39 per cent of invoices were paid late in 2019.

There was an average of £34,286 ($57,000, €50,000) owed in late invoices, with businesses waiting on £34bn ($45 bn, €40bn) in late payments and larger businesses – those with a turnover of £10m – taking longer to settle bills than their smaller counterparts.

Across Europe, German debtors are taking twice as long to pay invoices in 2019, while French, Italian and Spanish businesses have slightly improved on late payment to UK companies.

The latest MarketFinance Business Insights examined late payment trends between 2013 and 2019, analysing over 100,000 invoices. The data sheds light on how long SMEs are waiting to be paid, how late these payments were and the impact. The findings reveal that even businesses with healthy order books may be hit by issues around cashflow if their debtors pay late.

The analysis suggests that businesses typically agree 45-day payment terms from completion of work or delivery of goods. Despite this, almost two-fifths (39 per cent) of invoices issued in 2019 were paid late, although this is an improvement on 2018 when 43 per cent of invoices were paid late. Invoices paid late were typically larger in value (£34,286) than those paid on time (£24,624).

Over the six year period from 2013 to 2019, larger companies have been insisting on longer payment terms (49 days). When invoices were paid late, these larger debtors also settled much later (94 days) compared to smaller debtors (42 days).

Bilal Mahmood, external relations director at MarketFinance, said: “Late payment practices harm business cash flow, hamper investment and, in extreme cases, can risk business solvency. Separate research we’ve conducted highlighted that 87 per cent of businesses are prevented from taking on more orders because of the cash-flow constraint owing to late payments. Overall it seems who you are doing business with and where they are based is important to know for a small business if they need to forecast cashflow.”

Government measures such as the Prompt Payment Code and Duty To Report have helped create awareness but haven’t had the intended effect.

Sectors worst affected

Professional and legal services businesses suffered the most with late payment in 2019. Seven in 10 (70 per cent) of invoices were paid late, up from 30 per cent in 2018.

Manufacturers (57 per cent), retailers (49 per cent) and creative industries businesses were also heavily impacted by late payment of invoices.

Late payment practices improved for companies working in the utilities and energy sector with only a third (34 per cent) of invoices being paid late in 2019 compared to two-thirds (66 per cent) in 2018.

US companies were the worst payers

The analysis looked at invoices sent to 47 countries by UK businesses. US companies were the worst late payers, taking an extra 51 days to settle invoices from agreed terms in 2019. German firms took a further 32 days and businesses in China took an additional 10 days. French, Spanish and Italian businesses halved the number of days they paid late from 24 days late in 2018 to 12 days in 2019.

FURTHER READING: UK avoids recession but economy grows at slowest annual rate since 2010

FURTHER READING: Crypto could replace cash by 2030

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