Every year, UK businesses spend an average of 15 working days chasing late payments.
That’s a higher level of wasted time than in any other country in the world.
This is unacceptable, and particularly relevant as we approach year-end, a time when businesses are managing a last rush of customer activity and working hard to settle the year’s accounts to pay out Christmas bonuses, or start planning for 2018.
Our economic research indicates that a shocking one in two businesses are suffering or expect to suffer the impacts of late payments ahead of the festive season.
Small and medium businesses, the lifeblood of the UK’s economy, are wasting hours, days and weeks of unproductive time chasing payments owed to them. This needs to be addressed urgently. It cannot continue be tolerated in an era where technology is readily available to enable greater business agility, helping business admin and processes to be faster, more reliable and accurate. Paying late shouldn’t be the accepted norm.
The UK currently has the world’s highest proportion of invoices that are paid late, with nine per cent written off as bad debt. Nearly half of the SMEs surveyed said that they saw a direct negative impact to their business from late payments – ranging from reducing future investments, to cutting staff pay, to being unable to pay Christmas bonuses.
This is not an issue that needs huge amounts of time or investment to solve, but rather a simple change in culture – and maybe a greater use of technology – among businesses.
What is even more concerning is that our businesses don’t feel they have the right to chase these owed payments. The overwhelming reason for not following up with payees is to protect client relationships, which is understandable but not acceptable. This cultural stigma will continue to have a devastating domino effect on profitability and productivity levels – sending shockwaves throughout this network that our country’s GDP relies on.
We need to change our culture to one in which chasing late payments is reasonable (even expected), or eventually reach a place where the problem is a rarity. This will help SMEs operate more efficiently, increase investment, and reward their employees better.
A first step could be harnessing technology available to encourage automated chasing of invoices – a simple yet practical way to taken the burden off the shoulders of these small businesses.
The reality is that productivity will not improve until wealth creators get the respect they deserve, and this has to come through cultural change and education.
Losing the cultural stigma of chasing late payments is crucial in escaping the domino effect – all the time that SMEs are worrying about chasing late payments, their own suppliers will be paid late, and the cycle will continue.
Small and medium businesses are the heroes of our economy – creating jobs and prosperity and knitting our communities together.
So let’s encourage every entrepreneur or business owner to acknowledge their own achievements and take pride in their right to ask for what is rightfully owed.