Late payments over Christmas to cripple one-third of UK SMEs

The closure of debtors over Christmas will negatively impact a third (33%) of the UK’s SMEs, according to new research released today from Nucleus Commercial Finance.

Unfortunately for one in 10 of UK SMEs, it means that they will struggle financially – at a time when they should be able to concentrate on planning and preparation for the year ahead.

Nucleus Commercial Finance, a provider of finance for SMEs, is urging businesses to take action now and chase outstanding invoices to improve their cash flow and ensure they are paid on time this Christmas. The research shows that around a fifth (21%) of businesses are already chasing their debtors, in an attempt to overcome this seasonal financial challenge but the remainder could be caught out by the payment delays over the festive break.

SMEs from across the UK will struggle financially due to late payments over Christmas with the five worst affected regions being:

1. North East – 27%
2. East Midlands – 20%
3. North West – 19%
4. Northern Ireland – 17%
5. London – 16%

Chirag Shah, CEO of Nucleus Commercial Finance, comments: “We know that the issue of late payments is a challenge faced by too many SMEs every day. However, the extended closure of so many businesses over the festive period worsens the problem and for some businesses puts them into real financial difficulty whilst they wait for debtors to reopen and settle their bills. Businesses can take action now by speaking to their debtors and encouraging them to settle their bills before they close for Christmas. As a longer-term solution, we look forward to an update from Government on the Prompt Payment Code that is underway.”

Nucleus Commercial Finance has put together three top tips to help businesses get on top of late payments before the festive break:

1. Take control of your part of the process and set an example to your debtors. You need to invoice clients accurately, and make sure that you are billing the correct entity with the correct details. After a sale takes place, don’t be afraid to be proactive in following up with the client. Indeed, the longer a debt goes unpaid, the more likely it is it will remain unpaid.
2. By maintaining positive, open and honest relationships with clients, you will be making it easier to manage the payments process. As a result, your request to settle up on time (or perhaps even early) in advance of Christmas should be dealt with quickly and professionally. Remember the clients that always pay on time, and make the effort to thank them – it won’t go unnoticed.

Accurate forecasting requires real honesty, which can sometimes be difficult when you are passionate about your business succeeding. Take the time to plan when a dip in cash flow will impact your business and work in advance to avoid them. If you can see a situation is going to be difficult, think about how external finance could help your business to maintain a healthy financial position and equip you with the finances you need to invest in future growth.