Small businesses spend a third of their working year chasing down overdue payments from customers, new research reveals.
Late payment is one of the top three worries for the UK's small businesses, according to a survey by HSBC, driving up the number of companies that took invoice finances for the first time in 2004.
Customers owe UK companies over £20 billion at any given time, the study found, and when a small business is operating on a tight margin, a late payment can inhibit profits, cash flow and ultimately a firm's growth.
"Just one late payment can have a domino effect on the rest of a business," says Steve Bottomley, head of raising finance at HSBC. "But many small business owners worry about upsetting their major clients by chasing them or imposing interest charges."
Businesses struggling with overdue payments found they, too, subsequently struggled to make their own payments.
Some 38% found it difficult to pay their bills on time with invoices outstanding, and 10% reported problems paying their staff when a customer payment is even just a week late.
Despite legislation giving businesses the statutory right to claim interest on late payments, research from the Federation of Small Businesses (FSB) reveals that only 28% of businesses have successfully used the law to their advantage.
"By collecting their debts faster, companies can gain a competitive advantage, react quickly to new business opportunities and reduce the risk to their hard-earned profits," said Bottomley.
"It also frees up time that would otherwise be spent chasing debts."
