Late payments ‘remain a real problem’ for UK small and medium-sized enterprises (SMEs), research carried out by accounting software company Xero has suggested.
Its Small Business Insights report analysed 7.5 million invoices with 30-day payment terms that passed through the Xero system, and revealed that 52% of SMEs’ invoices were paid late in 2017, with the worst months for late payments falling in the first quarter of the year.
Xero also found that the average time taken for an invoice to be paid was 40 days, meaning that the 30-day payment term had not been adhered to.
Further analysis of different business sectors within the FTSE 350 showed that food producers took the longest amount of time to pay invoices, taking 60 days to pay, on average.
Businesses in the construction and materials industry took an average of 57 days to pay invoices, and household goods companies took an average of 53 days. Meanwhile, the pharmaceuticals sector payed invoices the most inconsistently, with some payments taking as little as 37 days, and others as many as 68 days.
Late payments have a ‘broader effect’ on small businesses, with affected firms often struggling to carry out accurate financial forecasting, said Xero.
Chancellor Philip Hammond has pledged to tackle the issue of late payments, and the government appointed the first Small Business Commissioner, Paul Uppal, in October 2017. Mr Uppal has been tasked with helping small firms with their payment disputes.
He said: ‘Small businesses are crucial to the health of our economy so it is vital that they feel supported in all areas, but particularly in the fight against late payments.’