New Reports Reveal Average Small Firm In The UK Is Owed £11,358
The average small company in the UK is currently owed more than £11,000, according to new reports.
Although some one in five SMEs surveyed by independent payment service provider Sage Pay revealed they have more than £30,000 in outstanding invoices from clients, the average sum is £11,358 across all surveyed.
It was also discovered in the study that 67 per cent of small firms still use paper invoices, despite the fact that these often result in longer waiting times, which can be costly for businesses needing capital quickly.
But while most companies only experience late payments periodically, for some it can have a real impact on profitability, according to Small Business.
Ten per cent of SMEs surveyed by Sage Pay revealed that a third of their invoices are paid later than they would like.
Mid-sized companies are, however, leading the way when it comes to e-invoicing, with 85 per cent in this group adopting the practice, which experts believe helps resolve the issue of late payments.
Andrew Straw, co-founder of holiday company Saddle Skedaddle, which has had problems with the delayed receipt of money, said: "We've had real issues in the past with keeping paperwork in check, filling it all in correctly and making it understandable when it came to VAT and tax returns.
"Not only does it consume time and money, it can be stressful to having to constantly try and keep tabs on invoices that are all too-easily forgotten about when I'm trying to run my business."
Simon Black, chief executive of Sage Pay, shared Mr Straw's sentiment and said that paper invoicing is holding back companies across the UK.
This is especially problematic given the issues some SMEs have in accessing funding from banks.
The Royal Bank of Scotland, for example, was recently criticised by the government after it failed to meet its own small business lending target at the end of last year.
Expert Opinion
Financial issues are of course vital to businesses of all sizes, but it is particularly important for smaller firms whose very existence can depend on prompt payment. <br/> <br/>"As this research identifies, a key approach may be to update and modernise payment services – particularly to increase flexibility and the number of options that clients have to meet payments. <br/> <br/>"However, it is important that small businesses which are looking to be flexible consider the various regulatory aspects to adopting such an approach and it may be worthwhile seeking professional advice to ensure that payment systems comply with key data protection and financial legislation." Steven Beahan - Partner