Small businesses owed an average £22,700 in late payments as cost-of-living crisis bites

Small businesses owed an average £22,700 in late payments as cost-of-living crisis bites
Dan Martin
Dan MartinDan Martin Content & Events

Posted: Thu 1st Sep 2022

Businesses are being hit by continued issues with overdue invoices as the cost-of-living crisis intensifies and energy prices soar.

New figures by accounting software company Intuit QuickBooks found that the average amount owed to small businesses with at least one late invoice rose to £22,700 in May 2022, up from £21,400 during the same month last year. The new figure is 65% of the average small firm's typical monthly turnover.

The report also found that 65% of invoices owed to small businesses were overdue in May this year, compared to 63% in 2021, suggesting that the cost-of-living crisis is having an impact.

Businesses facing higher costs

Intuit QuickBooks, a sponsor of Enterprise Nation's StartUp UK campaign, said as well as late payment, founders are having to tackle price increases from suppliers and for general running costs.

Rising energy bills is an issue with 48% of firms reporting an increase. Another 34% said they were being hit by an increase in fuel for business vehicles and 31% were experiencing a hike in the costs of raw materials and stock. As a result, one in three small businesses said they have had to increase their prices.

The findings follow recent research by Enterprise Nation which found three quarters of small businesses have been impacted by rising costs, leading to a third inflating prices for customers.

Jolawn Victor, vice president and UK country manager at Intuit QuickBooks, said:

"Tighter profit margins and limited cashflow mean that the rising cost-of-living is even more of a burden for the smallest businesses. Now we're seeing that, as ever, it's these businesses who are impacted most by late payments.

"There are however effective ways for small businesses to arm themselves against this issue. Investing in digital software with specially designed features - such as invoice tracking and automated reminders - means small business owners can avoid wasting time on awkward calls and emails.

"It is great to see that confidence among small businesses remains high despite the challenges being thrown at them. Their resilience is commendable, but it's important to know that there is support out there. Automating back office processes can reduce stress and help small business owners save valuable time, allowing them to focus on what is really important: running their business."

Businesses wait for news of government support

Either Liz Truss or Rishi Sunak will be announced as the new Conservative Party leader and prime minister on 5 September and pressure is on them to provide support to businesses facing soaring costs. Several groups have called for action with many demanding an energy price cap for businesses like there is for consumers.

The Association of Convenience Stores wrote to chancellor Nadhim Zahawi warning that many retailers will be forced to close without government support. "We will see villages, housing estates, neighbourhoods and high streets lose their small shops," the letter said

The trade body claimed energy bills have increased to an average of £45,000 for its smaller members, more than double what they were paying before renewing their contracts.

Emma Jones, founder of Enterprise Nation, said:

"Small business are vital to future proofing the economy. With an increase in costs for all areas of business, start-ups and micro businesses are struggling to grow and flourish and this is a risk to the economy.

"Any package of support needs to make sure it supports businesses at the smaller end, so bringing back COVID-style VAT reductions for industries such as food and drink could make a significant difference.

"Programmes like Help to Grow, which offer digital at one end and mentoring, advice and a programme of tailored support at the other, will be a lifeline for many businesses unsure of their options.

"These courses can help businesses focus on the issues they can control and learn to manage the things that they can't, such as increased costs. But there is still more to be done.

"The government must acknowledge the importance of start-ups in tackling issues like sustainability and energy supply. Start-ups like Anaphite, which is working to reduce battery charging times, saving 12% on manufacturing costs, are the businesses of the future. These are the innovators that will help us build a more sustainable and resilient economy - and they must be considered and protected now in any government response."

Both Truss and Sunak have refused to reveal exactly what support they would provide to businesses when it comes to energy costs although press reports claim the Treasury is looking at the possibility of introducing coronavirus pandemic-style grants to help firms deal with energy bill rises of up to 400%.

The Liberal Democrats have called for a £9.6bn grants scheme which would allow SMEs to access funding of up to £50,000 to cover 80% of the increase in gas and electricity bills.

Related Enterprise Nation resources

How are UK small businesses dealing with rising costs?

Book a free discovery call with a finance expert

Webinar: How to get paid on time in challenging economic times

Podcast: How to deal with late payment

Nine ways to manage your debtors and deal with late payment

Dan Martin
Dan MartinDan Martin Content & Events
I'm a freelance content creator and event host who helps small businesses and the organisations that support them. I'm also Enterprise Nation's Local Leader for Bristol. I have 20 years of experience as a small business journalist having interviewed hundreds of entrepreneurs from famous names like Sir Richard Branson and Deborah Meaden to the founders behind brand new start-ups. I've worked for a range of leading small business publications and support groups, most recently as head of content at Enterprise Nation where I was responsible for the prolific output of content on the company's blog and social media. I now freelance for Enterprise Nation as the website's news reporter and as the host of the Small Business sessions podcast. I'm based in Bristol where I run and host regular events with the local small business community in my role as Enterprise Nation's Local Leader for Bristol. I also have strong connections with other major business organisations in the south west region. In total, I've hosted over 100 events including conferences with an audience of hundreds for international brands like Xero and Facebook and live web chats from inside 10 Downing Street. With my partner, I co-run Lifestyle District, a lifestyle blog focused on culture, art, theatre and photography.

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