Research from a UK cash flow management platforms has revealed that UK SMEs are currently chasing £61bn* worth of unpaid invoices, up 20% since this time last year, enough money to employ more than two million people on an average UK salary. The findings come after the platform interrogated internal and external data to see how much money is owed to small businesses in the UK, and how much this number has increased during the pandemic.
The research, compiled by PennyFreedom.co.uk, revealed that two thirds of the six million SMEs in the UK have at least one late payment on their books, with an average value of £15,370.
Based on the UK’s average salary of £29,600, that unpaid money could pay for businesses to hire more than two million people. Currently 1.74 million people are out of work in the UK (5.1%), with experts predicting a rise to 7.75% unemployed once furlough schemes come to an end mid-2021. A full breakdown of the figures and survey data can be found here.
The survey revealed business owners and managers now spend an average of 2 days a month chasing unpaid invoices and associated financial admin, up 25% on this time last year. More than a quarter (26%) of businesses admitted to currently having ‘three or more’ unpaid invoices on their books.
PennyFreedom.co.uk found that companies across the board are being pressured to increase the length of their standard invoice terms – from an average of 33 days to 56 days – an increase of 69%. One in 10 businesses said they had been asked for 60 day payments terms during the pandemic.
Clearly a significant problem for SMEs, research from the Federation of Small Businesses in 2016 revealed that 50,000 small businesses are put out of business annually as a result of late payments, a £2.5bn hit to the UK economy.
PennyFreedom.co.uk is a unique cash flow management platform which allows small businesses, freelancers and self-employed workers to create, send and finance invoices. Users can invoice their clients for free, with the option of getting their invoice payment advanced within 24 hours (from invoice validation). The brand’s goal is to help all SMEs improve cash flow, by ensuring their invoices are paid in full, on time.
PennyFreedom.co.uk co-founder Colin Gunnel, said, “When we started PennyFreedom.co.uk our goal was to help businesses of all shapes and sizes improve their cash flow and financial stability, and eradicate worry about late payments and that hasn’t changed. COVID may have changed the way we all do business, but late payments and outrageous payment terms must be a thing of the past. The damage it does to small businesses and sole traders can be immense, and we were shocked to see just how much is owed to SMEs right now. It’s no wonder so many SMEs in the UK are struggling to stay afloat, especially in industries more heavily affected by the pandemic.
“We wanted to humanise these figures for people because ultimately they’re never just numbers on a spreadsheet. Prompt payment under agreed terms is imperative to keeping SMEs, the backbone of the UK economy, thriving and keep people in work. With unemployment set to rise again later this year the fact that so much money is owed is criminal.”