Hong Kong SMEs owed HK$13.3 bln worth of late payments in 2018
SMEs in Hong Kong are getting paid late to the tune of HK$13.339 billion worth of invoices last year.
This is according to Xero, which highlighted that only about 56% of payments to Hong Kong SMEs are made on time, while almost 14% (HK$7.885 billion) of invoices from SMEs are left unpaid in the city.
Late payments to SMEs impair their ability to grow their businesses and improve their products and services.
In Hong Kong, almost 9% of the payments are late for a period of one to three days while almost 7% are delayed by four to seven days.
In terms of sectors, the Professional, Scientific & Technical Services sector tends to have the highest dollar values for late and unpaid invoices. The sectors with the highest rate of on-time payments are Agriculture, Forestry & Fishing, Health Care & Social Assistance, and Public Administration & Safety.
According to recent research from American Express, another factor in late payments is also due to the fact that more than half of all payments between Hong Kong SMEs and mainland China still use old-fashioned cross-border payment methods. These include telegraphic transfers (89%), cheques (67%) and banker’s drafts (61%).
The current trade war between the US and China has led to increased costs for cross-border trading. It is also leading to a climate of uncertainty for Hong Kong SMEs, forcing businesses that rely on trading with the US to find new suppliers and customers. According to the report by Xero, 81% of Hong Kong businesses have stated that they are pessimistic about the trade negotiations.
In the short term, the Hong Kong government is offering support for small businesses by introducing a 20% higher credit limit of HK$5 million when doing business with American importers.
“Unfortunately, dealing with late payments is part and parcel of running a business. If the money is tied up in late payments, small businesses struggle to maintain positive cash flow, raise the capital needed for investments and grow their business,” Xero regional director for Asia Kevin Fitzgerald said.