Late payments are costing small businesses £684 million per year, in addition to rising inflation, data has revealed.
According to the study of thousands of companies, conducted by Accenture with help from Xero, the cause of this loss is due to firms receiving payments 5.8 days late on average.
The data further discovered that 49 per cent of invoices were paid late, with 12 per cent paid over a month after they were expected.
These late payments to small businesses is having a considerable impact on their cash flow.
Watch out for red flags
As a small business owner, it is important for you to be aware of the early warning signs of cash flow trouble, also known as ‘cash flow red flags’.
As well as late payments, there are a number of red flags to keep in mind, such as:
- Expenses:As a result of supply chain issues, price shocks and overall inflation, small business expenses rose by 18 per cent in 2021.
- Seasonal reductions:Small businesses, particularly in the hospitality sector, produce 28 per cent of their annual revenues in summer, compared to 22 per cent in winter.
In another study conducted by Xero, 79 per cent of large UK businesses said that it would be more costly for them to operate without their small business suppliers.
However, 55 per cent admitted to having paid a small business supplier later than agreed in the last 12 months.
How to tackle red flags
It is highly recommended that you consider implementing online invoice payment alternatives for swifter payment and better credit control.
It also pays to conduct regular management accounting to track and forecast cash flow within your business to make sure you have the finances to continue trading.
As well as this, it’s vital for you to seek professional advice and work with an accountant, such as us, to stay on top of Government systems offering payment schemes to settle your expenses.
Need help on matters such as the above? Get in touch with our team today.