Research reveals that UK SMEs are in a ‘late payment epidemic’
UK freelancers and small business owners continue to be plagued by chronic late payments, according to new research by FreeAgent, as they unveil that 46% of invoices between 2019 and 2020 were paid late.
The analysis of over 2 million invoices sent by FreeAgent customers between January 2019 and June 2020 has revealed that just over half (54%) of invoices sent over the past 18 months were paid on time, meaning over 2 in 5 invoices are paid late.
The research reveals the late payment epidemic is getting worse not better for SMEs and freelancers, as the number of invoices paid on time has fallen 4% from the previously recorded 58% in the company’s 2019 research.
The findings also demonstrate the impact that the Covid-19 pandemic has had on the finances of SMEs and freelancers across the UK as the actual number of invoices sent by FreenAgent users and plummeted by 33% over the lockdown period (April-June 2020).
CEO Ed Molynuex is calling for action from the UK government in the form of new legislation and significant penalties, especially in this current volatile economy, as late payments remains one of the most widespread and devastating problems for freelancers and small businesses, who are unable to absorb these into their accounts leading to cash flow problems.
Mckinsey found that 80% of SMEs say their revenues are declining due to the pandemic, with one in four concerned about defaulting on loans. Late payments are a significant issue to the UK economy as they have the potential to severely disrupt business operations, in extreme cases leading to closure or furloughing of staff.