– Data reveals £25,880 owed on average to small businesses in the construction sector
– Large construction firms revealed as some of the UK’s worst payers, with 30-day invoices being after 57 days on average
Shocking footage of a digger trashing a Travelodge illustrates the frustration felt by small businesses and employees involved in payments disputes.
According to reports, the digger’s rampage through the Liverpool hotel’s reception was triggered by the driver’s anger at an unpaid £600 payment due to those working at the site.
Yesterday’s incident comes as research from small businesses accounting platform Xero shows that £24,841 is owed in late payments to the average small businesses in the UK, with £25,880 owed on average to small businesses in the construction sector.
Based data taken from 2 million invoices, £25,880 equates to 11 months’ average staff wage*, 37 months of average mortgage payments** or 9 family holidays*** and suggests that the SMB economy could be forced to deal with an average deficit of £141bn as a result of this debt.
Xero Small Business Insights is a snapshot of the health of UK small businesses, updated monthly. Its metrics are based on anonymised, aggregated data selected from 355,000 UK Xero subscribers. This data has revealed that 30-day invoices are on average paid after 46 days by companies within the FTSE 350.
By analysing the insights further, Xero has revealed that the FTSE 350 businesses in construction and materials are one of the worst offenders when it comes to paying small business clients on time. Perhaps unsurprisingly therefore, it found that these firms are paying 30-day invoices after an average of 57 days – that’s almost three weeks longer than the norm and almost a month after the deadline.
The top 10 small business sectors on Xero owed the most from late payments on average:
- Wholesale trade (£42,989)
- Administration and support (£40,662)
- Transport, postal and warehouse (£31,555)
- Public administration and safety (£31,541)
- Electricity, gas, water and waste services (£31,309)
- Financial and insurance services (£29,732)
- Manufacturing (£29,123)
- Information, media and telecoms (£28,682)
- Construction (£25,880)
- Professional, scientific and technical services (£23,554)
Three tips to improve cash flow and protect businesses from late payment debt:
- Be selective about who you work: with and credit check prospective clients. A bad credit history could indicate issues with late payments in the future
- Implement interest charges: on late payers to encourage prompt payment
- Set automated responses: Many accounting software solutions are now capable of issuing automated reminder letters when payments become overdue. Automating the process of sending a reminder email reduced the amount of time you have to spend waiting and chasing for payment.
