13% of small business invoices remain unpaid each year
39% of invoices fail to be paid on time
76% of the 25 employee hours per week spent chasing invoices could be saved with e-invoicing
Research carried out by Tradeshift has found that 13% of invoices that are issued by small businesses in the UK every year remain unpaid, resulting in a £1.4tr black hole in the economy. Times are particularly tough for small businesses at the minute and 30%, just under a third, have said that the cash flow problems caused by the unpaid invoices could well cause them to lay off staff, whilst 20% said they would have to take out a business loan or turn away business.
The responses that owners of small businesses and financial decision makers made in the Tradeshift survey are revealed in a new report called “Getting Paid”, which is now available to download at shiftbusiness.net/getting-paid. It found that,on average, small businesses issue 528 invoices every year and 69 of these remain unpaid, totalling 177m invoices.
In addition to these unpaid invoices and, despite the majority of small businesses having payment terms of less than 60 days, 39% of all invoices issued are not paid on time. When asked about the reasons for non-payment of invoices, 34% put slow payers at the top of the list, followed by companies going out of business (24%), disputes over work (19%), cash flow (11%) and administration (9%).
The resulting administrative burden of chasing these payments requires an average of 25 employee hours per week spent managing, processing and chasing invoices. Small business owners estimate that 76% of this time could be saved if all invoices were managed online, but only 28% said they currently handle invoices in this way. This burden is magnified by the fact that over a third of invoices are still received by post.
Mikkel Hippe Brun, Co-founder and Chief Strategy Officer at Tradeshift, an online platform that aims to revolutionise e-invoicing by eliminating charges for small businesses, sees this as a dangerous trend that is crippling UK companies: “For centuries, the invoicing process has held small, innovative businesses at the mercy of others with a clear disregard of agreed payment terms and damaging cultural precedents. This is 2012 and there’s no reason why invoicing shouldn’t undergo a revolution that fits the modern times in which we live rather than acting as a noose waiting to drop around the necks of the UK’s army of small businesses.”
The full report – available to download from shiftbusiness.net/getting-paid – contains the full research as well as tips for small businesses looking to reduce the burden of unpaid invoices. Small businesses can use Tradeshift’s e-invoicing platform free of charge. For more information, visit www.tradeshift.com.