Small and medium sized businesses say that late payments have reached an all time high since the Coronavirus pandemic and is putting their recovery in crisis.
Research coming out from QuickBooks has shown that although chasing late payments has always been a bit of a challenge for SMEs, over 20% believe the problem is now at its highest levels since the pandemic began.
According to the research, 64% of SME business owners fear that late payments could result in their business going bust in the near future. Especially with the new Corporate Insolvency and Governance Act 2020 putting more pressure on creditors being able to recover debts from businesses that have been adversely financially affected by the pandemic.
More than 25% of small and medium businesses are concerned that liquidation could occur as soon as within three months, while 16% suggest an even shorter time period of just one month, highlighting the extreme situation businesses are going through.
Cashflow is also one of the main worries for SMEs, who typically do not have a cash war chest of reserves. Late payments disrupt cashflow and therefore seriously put SME’s at great risk of being able to pay their essential business overheads, maintaining profits or even keep trading. COVID-19 has created such an unprecedented throttling for SMEs that many have had to diversify and invest in new ways to sell and communicate with customers despite being under severe financial stress due to lockdown measures and poor trading figures.
The stats show that more than 50% of SMEs have experienced problems getting their invoices paid since the COVID-19 pandemic began. 67% of small businesses (10-49 employees) and 72% of medium sized businesses (50-249 employees) have been even more widely affected. With 26% of single owner businesses and 46% of micro businesses (1-9 employees) also being hit by late payment issues. QuickBooks research claims that since the COVID-19 pandemic started, approximately 30% of the total amount owed to small businesses is overdue with the average amount owed totalling at around £6,000 net.
Time has also been a disruptive drain on SMEs with many hours invested in chasing late payments and overdue invoices instead of spending the time on business recovery. Even before the Coronavirus, an exhaustive amount of hours was spent on credit control by SMEs and their respective accounts teams, the equivalent of more than one working week spent every year for the average small business, according to Intuit.
What is even more surprising is that even through these extreme difficulties in chasing payments, only 11% of SMEs have used any type of accounting software to automatically chase late payments of invoices since COVID-19, with such automated reminders and statements built in natively to accounting products like QuickBooks and Xero. By taking advantage of technology, it significantly eases the burden of invoice chasing as well as reducing valuable time spent on credit control and debt collection so that businesses can concentrate on more pressing recovery and rebuild matters. And just as important, only 16% have factored in cashflow projections with inherent payment delays into a business continuity plan, a process strategy that all businesses should implement looking ahead at the next 6 months of this ongoing global pandemic crisis.
To get your invoice debts collected effectively, manage your creditors throughout the Coronavirus pandemic and keep cash coming into your business, Get In Touch with us on 0208 720 7309 or email email@example.com. You can also access COVID-19 specific credit control support at https://www.creditcontroluk.co.uk/coronavirus-debt-support.