Small and Medium Enterprises (SMEs) have constantly been enduring numerous challenges over the past several years.
Whether it comes to the financial constraints that came with the COVID-19 pandemic, or the current strife of the economic climate, SMEs are embattled more than their larger counterparts.
However, the UK government published its Payment and Cash Flow Review Report last November, in which it highlighted the mounting problem of late payments to SMEs and called for greater transparency over reporting to reduce the threat of late payment culture.
Lynne Darcey Quigley, CEO and Founder of cloud-based credit management platform Know-It, expressed her delight to Payment Expert over the UK government addressing “one of the biggest dangers” to the country’s business culture.
She said: “It is good to see the government taking notice of one of the biggest dangers to our business community. Late payment culture and the subsequent effect it has on business cash flow health.
“Ensuring businesses are reporting on payments will add clarity and accountability to the invoicing process. At the same time, it is important to ensure a balance is struck to ensure businesses are not burdened with too much reporting in this process.”
Within the report it detailed that in 2022, UK SMEs were owed an average of £22,000 in late payments, severely impacting cash flow.
This is particularly worrying when the report also noted that 40% of invoices are still not being paid accordingly on time, as the UK lags behind its European counterparts when it comes to payment time.
However, payment times have also been reduced from 81 days in 2010, to 36 days in 2021. This has been attributed to the rapid and accelerating nature of payment technology, which Quigley also acknowledged.
“This is where technology can step in and take on a lot of the workload on behalf of credit controllers,” she continued.
“Having the ability to credit check prospective suppliers and customers before you enter into partnership is the first step businesses can take to protect their cash flow. The latest solutions can now advise SMEs on a business’ credit history and show whether or not the prospect is a high late payment risk.
“Eliminating the risk of falling victim to late payments before entering into partnership is the proactive protection technology can now offer SMEs at a time when they need all the support they can get their hands on.”
Whilst addressing the dangers of late payments will be welcomed by the SME sector, the government has also been implored to take action and not let this go by the wayside.
In his opening foreword of the November report, Kevin Hollinrake, Minister for Enterprise, Markets and Small Business, he said that the government will be taking “actions to extend the scope of the regulations”, as well as improving public awareness, providing more information to businesses and kick-starting an enforcement program.
Quigley added: “SMEs will be buoyed to hear that late payments have now caught the attention of the government. For too long it has been the silent threat which has damaged and often sunk businesses over the years.”.
“If the government wants to be taken seriously on this threat, then it needs to be vocal in its messaging and warn frequent late payers on the damage they inflict upon other members of the business community.
“Taking meaningful action and speaking openly about late payments will further close the gap in average time taken for payments to be made and deter frequent offenders.”
So are the solutions readily available for SMEs to begin to improve their cash flows and maintain a systemic flow of payments that do not hinder their overall operations?
Quigley assures that these solutions are available and will only be bolstered through the committed support of the UK government.
She concluded: “The latest solutions are readily available to monitor and identify late payers and with the support of the government, should be able to effectively clamp down on frequent offenders.
“It is positive to see increased attention highlighting late payment culture and see the average payment time diminishing slowly over the years, but more does need to be done to protect the SME community.”