Small businesses are still struggling from the scourge of late payments, with a new survey showing a six per cent increase in the amount owed over a year ago.
The new data from the Intuit QuickBooks Late Payments Bulletin reveals that the ongoing issue is hitting small businesses’ cash flow at a time when the cost-of-living crisis is intensifying.
Crippling energy bill rises
It comes as SMEs are facing crippling energy bills, with just under half (48 per cent) reporting an increase.
As a result, one in three small businesses has said they have had to increase their prices, while others are looking to cut costs and increase their cash reserves.
The average amount owed to small businesses with at least one overdue invoice has risen six per cent year on year, the study found.
This has risen to £22,700 in May 2022, up from £21,400 the previous year and is 65 per cent of the average small business’ typical monthly turnover.
Two thirds of invoices overdue
Meanwhile, almost two-thirds (65 per cent) of invoices owed to small businesses were overdue in May this year. In the same period last year, this figure was 63 per cent.
A recent study by the Federation for Small Businesses (FSB) found that half of the 1,300 small business owners and sole traders surveyed between April and June reported being paid late, while one in five said the issue was getting worse.
The FSB has offered some best practice guidance for reclaiming any debt:
- Make sure the invoice details are accurate before you consider acting
- Contact your customer in writing to say you will be exercising your statutory right to claim interest (at eight per cent over the Bank of England base rate), and compensation for the debt recovery costs under the Late Payment legislation
- Stop supplying any further goods or services until you receive what you are owed. If your product or service is important to your customer, they may be more inclined to pay.
The MDH team are here to support you
If the above will have an impact on you or your business, please book a 30-minute call with Michael to discuss.
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