UK small businesses experienced late payments in 2022, highlights FSB report

A recent report by the United Kingdom’s Federation of Small Businesses (FSB) highlighted the struggle of small business owners who experienced late payment problems in 2022.

During 2022, a quarter of small businesses (25%) reported more late payments than in the previous three months, with construction (34%) and manufacturing (29%) being the most affected sectors.

During the same year, about half of small firms (52%) experienced late payment in the previous three months, with education (69%), construction (64%), and manufacturing (63%) being the most affected industries.

Small businesses that experienced an increase in late payment during 2022 were more likely to apply for credit (17% compared to 9% of those that did not experience late payment).

Meanwhile, another report by accounting software provider Xero shows that small businesses experienced an average payment delay of 30.5 days in January 2023.

During the pandemic, these businesses experienced an average of 32 days for payment.

When invoices with payment terms and due dates were late, small firms waited an average of 8.4 days for payment.

SMEs account for 99.9% of all businesses in the UK and contribute significantly to the UK economy.

By the beginning of 2022, the UK had 5.5 million small companies. However, this compares to a projection of 5.9 million in 2020, indicating a considerable decrease in the population of small enterprises in just two years.

The impact on small businesses is severe, with late payments leading to small firms running into cash flow problems, having to rely on overdraft facilities, and facing slowdowns in profit growth.

However, applying for credit can be challenging for small businesses, especially those that have experienced cash flow problems due to late payments.

With little hope left, SMEs need to concentrate on their working capital, especially accounts receivable, to increase their cash flows.

At RIABU, we have developed a concept called the Virtuous Revenue Cycle (VRC), which is discussed in our book Let the Cash Flow, emphasizes timely payment, finding ways to delight customers by anticipating and meeting their every need, and continuous improvement in the service culture.

The VRC includes understanding mutual expectations through written credit policy, proactive customer service, and engaging the whole team to identify and resolve unmet customer expectations and assure timely payment.

Get more tips on effective cash flow management from our book, Let the Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com