Nearly 90% of UK businesses face payment delays. Half (52%) experience this in under 10% of payments, while nearly one in five (18%) see delays in a quarter of payments, and 11% report late payments almost half the time.
This can disrupt cash flow, especially for smaller businesses with little financial reserve. Alarmingly, one in 10 firms are unaware of their late payment frequency, risking financial instability by not tracking their cash flow closely.
Top reasons for late payments:
|
Rank |
Reason for late payments |
Percentage of respondents |
|
1 |
Cash flow issues caused by customers they supply paying them late |
40% |
|
2 |
Cash flow issues caused by other reasons (worsening economic conditions) |
29% |
|
3 |
Administrative error/failing (including failing to log invoice or invoicing error) |
24% |
|
4 |
Paying late on purpose, where businesses use late or long payments as a form of free finance |
18% |
|
5 |
Technical issues (including invoices got lost or failed to deliver) |
11% |
Cash flow issues are the biggest driver of late payments from business customers, with 40% of businesses reporting this. An additional 29% cited cash flow problems caused by worsening economic conditions, showing that delays in one part of a complex supply chain can lead to others.
Administrative errors, such as invoicing mistakes, account for 24% of late payments, often due to manual invoicing systems. Another 11% result from technical issues.
18% of businesses experience customers delaying payments as a form of free financing, highlighting a power imbalance where larger businesses take advantage of smaller suppliers. Stricter regulations could help alleviate this issue.
11% of businesses were unsure of the cause of late payments. This could be due to inadequate record-keeping or poor communication with customers.
Joe Phelan, money.co.uk business credit cards expert, offers his tips for handling late payments:
“By adopting proactive measures and leveraging financial tools, SMEs can build resilience and protect their operations from the risks associated with late payments. Using a business credit card effectively and the key to this is thinking of the card as a short-term buffer rather than a long-term crutch.
“Start by choosing a credit card that offers longer grace periods – some providers do this for new customers. You should also look for cards that provide zero or a reduced introductory APR, especially if you anticipate carrying a balance from time to time. And, if they offer cashback or rewards, that is even better, as this can offset some of your expenses.
“Timing can be everything, so align your credit card payments with your income schedule as best as possible. For example, if you’re typically paid mid-month, set the card payment to be due later in the month to avoid late fees.
“Lastly, it’s well known that credit cards can accrue interest very quickly. Use accounting software to manage these payments, as manual methods can lead to human error. And remember, a credit card should supplement your business’s financial plan, not replace it.”