Three quarters of SMEs bite their tongues over chasing late payments in fear of losing customers

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The Small Business Commissioner, Paul Uppal, and Growth Street, the business lender transforming the business overdraft, launched their collaborative whitepaper ‘Taking Notice of UK Business’ yesterday. The whitepaper follows a survey of UK SMEs on their experiences of unfair payment practices.

The key findings of the report include:

  • 75% of SMEs said they would fear taking action against a late payment at the risk of damaging their client relationships.
  • 43% of SMEs said they have experienced late payments for their goods or services from larger businesses.
  • 76% said that not getting paid at all for their work was a significant issue for their business.

Canvassing 500 UK SME decision-makers across the country, the survey asked key questions around late payments, standard payment terms and views on Open Banking.

The survey shows that 43% of SMEs had experienced late payments from larger businesses. Furthermore, nearly half of all medium sized businesses have been subject to late or otherwise unfair payment practices from large businesses (47%). Similarly, 38% of small businesses report late or unfair payments.

When it comes to factors that may make SME decision makers reluctant to act against unpaid invoices, fear of damaging client relationships was the greatest concern, with 77% registering at least some influence over whether they would act.

The second biggest concern was around damaging chances of getting paid at all, with 76% saying that may influence their taking acting in relation to unpaid invoices.

Most businesses surveyed had payment terms of up to 30 days (over 54%). Only 14% of SMEs said that the payment terms they had agreed and signed with their suppliers were greater than 61 days.

Paul Uppal, Small Business Commissioner:  “The key findings in this survey highlight that small businesses tolerate late and non-payment due to a fear of reprisal.

“The Government is building an environment in which small and medium-sized businesses can continue to prosper. Through my role, I am committed to keep the spotlight on this issue and instil confidence in the minds of small businesses. I will continue to tackle late payment and address the imbalance in market power between parties, promote transparency and encourage better payment practices through culture change.

Greg Carter, Growth Street CEO: “Every business should have the right to know when and if they will be paid. The fact that a third of all businesses have been subject to unfair payment practices is a shocking statistic – more needs to be done to educate SMEs about the options available and empower them to act against poor payment practices.

“This survey with Paul Uppal is part of Growth Street’s broader commitment to helping UK SMEs grow: one of the reasons we are transforming the overdraft for SMEs is to provide an alternative to invoice finance. However, people shouldn’t need to seek loans to cover unpaid invoices – they should have the support and knowledge that they will be paid on time, every time.”