UK’s late payments culture impacting 4 in 10 businesses

Brought to you by SAP Concur

Concur has released a report examining the UK’s late payment culture, which is putting job creation at risk.

The report includes information from 1,233 British businesses and sheds new light on the consequences of poor invoice processes.

The research found that 40% of British businesses claim to have received a late payment in the last month and 63% of medium sized businesses (50-249 employees) receive late payments monthly. Late invoice payments forces businesses to take action to protect cash flows such as making redundancies (7%), stopping planned investments (17%), being unable to pay salaries (15%) and significantly reducing innovation spend (10%).

Influence on investment

The polling revealed that 32% of businesses would feel a significant impact if their biggest customer did not pay an invoice for 90 days and 21% of medium sized businesses would have to stop planned investment. Additionally, 11% would be forced to make redundancies.

Emma Maslen, Senior Regional Director for Enterprise at Concur, explains why medium sized businesses are more affected by late payments: “Although not cash-rich, small and micro businesses have the agility and flexibility to make strategic decisions when it comes to cash flow. But for the mid-market, they have reached a position where they need to keep salaries and expenditure consistent, meaning they lack agility, but may be operating at a relatively slim margin in comparison to bigger players. This is crucial information about the oft-forgotten middle of our economy.”

The report also shows that approximately 353,000 jobs are being lost per year, or £549m through lost taxation capital. This figure does not include the average of 130 hours, or 16 working days, spent by the typical SME chasing late payments, meaning the overall impact of late payments could be substantially higher. 

Improving the world of payments

Concur, as an expert in the area of payments, is launching the Invoice Utopia campaign to improve the world of payments between UK businesses. In the future, 27% of businesses would like to see more protection against late payments. A major component of this will be the continued enforcement of duty to report. However, with 78% of SMEs unaware about these new requirements, the Government will need to make some clarifications.

Dafydd Llewellyn, MD of UK SMB at Concur, concludes: “This report sets out a vision for an invoice utopia where IT ensures that late payments are a thing of the past. This can only be realised if change is present in technology, business culture and an innovative approach to payments and invoices.

“Businesses need to lobby harder when negotiating their original payment terms; large businesses need to realise the potential damage extortionate payment terms are bringing; government and regulators – in particular with the Small Business Commissioner and duty to report need to support all businesses; and technological tools that can give a clear picture of cash flow and payments should be utilised across the board. Only then will the burden be lifted from finance teams, businesses will have the room to grow and the UK economy will find itself in a powerful position to face the future.”

Read the full report here.