Recent data from Pay.UK and CICM highlights the significant impact overdue payments have on Britain’s small businesses, with Scottish SMEs disproportionately affected

THE joint study by payments authority Pay.UK and Europe’s largest credit management membership body the Chartered Institute of Credit Management (CICM) was carried out at the end of 2020, and showed not only that UK SMEs are owed billions, but also, that they are paying out billions themselves just to collect their debts. Almost a fifth (18%) of those waiting on funds spent more than £500 per month chasing payments in 2020, adding up to a hefty £5bn total bill for the UK’s smaller businesses – magnifying the effects of a pandemic and the subsequent economic downturn.

The detailed analysis of how the UK’s small businesses have been impacted over the last year, released last week, clearly illustrates the lasting influence repayment debt has on the British SMEs. Although this is a UK wide crisis, Scottish businesses are feeling these pernicious effects the most, with 60% affected by overdue payments, compared to the UK average of 51%.

Three-quarters of those experiencing past due payments receive funds one month or more over agreed terms, and 27% are even waiting longer than two months. As a third of these businesses must subsequently rely on bank finance, delaying funds for work completed just adds to the total debt, and therefore pressure, felt by SMEs in the UK; contributing to the cash flow problems already pushed to breaking point by a pandemic. This issue, although affecting everyone, is particularly problematic for the countless new businesses formed in 2020, which need as much support as possible in order to succeed.

Lynne Darcey Quigley, Founder & CEO of Know-it, commented: “This research has highlighted the ongoing struggle many businesses are facing in managing cash flow, and key to that is overdue payments. SMEs are particularly vulnerable and have been significantly impacted by the crisis anyhow, so this is just adding fuel to the fire: magnifying economic insecurity, and further jeopardising long-term economic security”.

“Unfortunately, the data highlights an increasing challenge when it comes to late payments. High consumer and business confidence has resulted from a successful vaccine rollout and excess high street consumer spending. However, any economic damage will have a lasting hangover, with many SMEs still fearing their long-term survival.”

Lynne concluded: “Throughout the pandemic, we have learned just how crucial rapid digitalisation is, and managing cash flow is no different. With the help of technology, we can do things electronically and more efficiently than before. Therefore, we believe there is an opening for technology to help SMEs streamline their credit control processes to credit check and monitor, chase for payment, and collect overdue unpaid invoices, all from one place – and this is exactly what we aim to do at Know-it.

This article was first published by Scottish Business News.