Small businesses owed £112 billion in late invoices

The UK's smallest businesses are owed an average of £42,000 in overdue invoices, new research reveals.

Accounting software firm Sage commissioned analysis of over 1.2 million invoices from more than 31,000 businesses by the Centre for Economics and Business Research (CEBR).

It found that 44% of the invoices were paid late, with a total of £112 billion currently locked up in late payments.

Christopher Breen, CEBR head of economic insight, said:

"Late payments have worsened over the past three years. While payment times are falling slightly, it's not enough to offset the rising value of overdue invoices.

"With the average late invoice now comparable to the typical cash a small business holds, this issue is withholding capital that could be used to invest or build resilience."

Action on late payment to help small businesses

Sage unveiled the findings at an event in the House of Commons with Enterprise Nation and the Federation of Small Businesses. It was attended by small business owners, MPs and the secretary of state for business and trade, Jonathan Reynolds.

Sage called on the government to move ahead with rolling out e-invoicing as part of a wider digital adoption strategy that ensures small businesses embrace technology to grow. The government recently ran a consultation on e-invoicing.

Derk Bleeker, chief commercial officer at Sage, said:

"It's clear that too many small businesses continue to be held back by outdated systems and slow payments, but this is a fixable problem,"

"Digital tools are already helping businesses get paid faster, reduce admin, and unlock cash to invest in growth, but it is imperative that policy in UK continues to enable them further. With AI assistants such as Sage Copilot and e-invoicing, businesses have the opportunity to drive better cashflow, improve efficiency and fuel growth."

Speaking at the event, business and trade secretary Jonathan Reynolds highlighted the actions being taken by the government aimed at tackling the scourge of late payment.

He highlighted the launch of the Fair Payment Code, a voluntary scheme for large businesses to commit to paying suppliers on time. It replaced the Prompt Payment Code, which launched in 2008.

The code has three tiers to recognise best payment practices and help smaller firms identify reliable partners.

Reynolds also referenced upcoming new legislation that will make it a requirement for large companies to include headline information about their payment performance in their annual accounts.

In addition, he said a consultation will soon launch on increasing the powers of the Small Business Commissioner, who helps small businesses tackle overdue invoices, and officials are analysing responses to the recent consultation on e-invoicing.

Relevant late payment resources

• How to invoice and get paid faster

• How small business owners are dealing with late payment

• Nine ways to manage your debtors and deal with late payment