SME business owners continue to be plagued by the problem of late payment, according to new research.
Analysis of invoices sent by small business customers between June 2023 and June 2024 has revealed the startling impact of late payment on Wales’ SME sector, with almost half (48%) of invoices paid late. This is up from 43% in the twelve months prior, representing a 11.6% increase in invoices being paid late.
Llandudno is the city worst affected by the late payments crisis in Wales seeing 51.2% of invoices sent during the past year paid late. In contrast, Llandrindod is the city least affected by late payment, with just 32.2% of invoices sent by small businesses within the LD postcode paid late.
Looking at the national picture, Scotland (48.5%) has the lowest rates of late payment after Wales, closely followed by England (49.3%). In contrast, Northern Ireland is the worst nation in the UK for late payment, with a staggering 62.4% of invoices sent over the past 12 months paid late.
At 49.3%, the UK’s average late payment rate is now higher than it was during the same period the previous year (43% in 2022-2023). It is also higher than it was during the 2020 calendar year (46%), which suggests that the issue is becoming a more prevalent problem across the devolved nations for small business owners in the post-COVID and cost-of-living crisis era.
Roan Lavery, CEO and co-founder of FreeAgent, said:
“Maintaining a healthy cash flow is the number one priority for anyone running a business. However, the vast majority of small businesses simply don’t have the luxury of being able to absorb late payments into their accounts – they need to get paid promptly to keep themselves afloat.
“It’s therefore very concerning to see that the level of late payment has increased in recent years, and that nearly half of invoices in both Wales and across the rest of the UK were not paid on time over the past 12 months. This isn’t just a case of payments coming a few days or weeks late, as some of these invoices take months to settle up or – in some cases – won’t be paid at all. Looking across the country’s five million-strong small business sector, it’s clear to see just how big of a concern this is for the UK.
“Our economy remains in a fragile state, with many small businesses still feeling the impact of major disruption caused by the Covid-19 pandemic and the cost-of-living crisis, so it’s more important than ever to ensure that SMEs are protected and supported. I hope, therefore, that our new government will commit to bringing in new legislation or putting more resources into the Small Business Commissioner’s remit, so that the chronic issue of late payment can be properly tackled.”
A separate survey of small business owners recently conducted by FreeAgent has also revealed how SMEs feel about the issue of late payment in the UK. It found that around a quarter (24.6%) of respondents said they had, at some point, felt the future of their business was in jeopardy because they were not getting paid on time.
The survey also revealed that more than half (55.4%) of respondents felt the Small Business Commissioner should have greater powers to tackle the late payment problem, while 46.1% believed that the Prompt Payment Code (PPC) should be made mandatory for all businesses to follow. In contrast, 16.7% said they thought the PPC should only be mandatory for large businesses with more than 250 employees, while 16.5% said they thought more companies should be incentivised to join the PPC rather than making the scheme mandatory.
The research was carried out by cloud accounting software company FreeAgent.
