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Two fifths of SMEs can’t pay staff on time due to late payments – Bibby Financial Services

The survey showed 42% of SMEs had been unable to cover payroll due to late customer payments, while 24% had to pause hiring.

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Two fifths of SMEs can’t pay staff on time due to late payments – Bibby Financial Services
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Late payments have made it difficult for two in five small and medium-sized enterprises (SMEs) to pay their staff on time in the past year, research from Bibby Financial Services found. 

The survey of 1,000 SME owners and decision makers showed 42% had been unable to cover payroll due to late customer payments, while 24% had to pause hiring.

The SME Confidence Tracker from Bibby Financial Services found 41% of small businesses dipped into emergency funds to stay afloat in the last 12 months.

Derek Ryan, CEO for North West Europe at Bibby Financial Services, said: “With economic growth already faltering, late payments are a significant threat to the survival of SMEs across the country, applying pressure to businesses already battling high operating costs. 

“When firms are forced to make impossible choices – between hiring and surviving, dipping into emergency funds or struggling to pay staff on time – it’s a clear sign the Government needs to step in.”

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The latest Small Business Strategy Report from The Business and Trade Committee called on the Government to address the late payment crisis. 

Bibby Financial Services data showed the issue is getting worse, with businesses now owed an average of £66,770 in unpaid invoices, up 10% year-on-year. 

62% of SMEs said customers are taking longer to pay invoices in full compared to the year before.

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Ahead of the Chancellor’s Spring Statement, 69% of SMEs called for serious consequences for repeat late payers, and 27% wanted the Government to bring in specific legislation to protect them.

Tim Gelardi, director of systems and compliance at FORT Builders’ Merchant, said: “We are seeing more customers struggling to pay in line with terms, often because they’re facing late payments themselves or failing to secure the margins they expected when bidding for work. 

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“Operational and raw material costs are also unpredictable. 

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“If prices spike, there’s no guarantee that our customers have factored that into their budgets.”

Gelardi added: “There are several knock-on effects. Late payments force us to waste time chasing customers and require us to implement more official collection procedures which can damage relationships.

“The situation has meant that we’ve shortened our timescales on customer terms, curtailing supplies earlier – just to get our name in the hat when customers decide who to pay first. 

“At the end of the day, we’re a builders’ merchant, not a bank.”

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Ryan said: “Late payments are draining confidence from small businesses and holding back growth. 

“While the Government laid the groundwork for change to the payments framework in last year’s consultation, SMEs are desperate for action, and many are turning to alternative finance for the support they need. 

“If the Government is serious about kickstarting the economy, it must back SMEs with policies that provide certainty that enables businesses to invest in their people, products and services.”

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