It is important that the UK’s smallest businesses should receive greater support on prompt payments, due to their more significant need for debt management help, according to Debt Guard Solicitors.
A newly published study by the company looks at 9,000 submissions to Companies House in order to build a picture of UK businesses’ real account details.
In all, trade debt stands at £6.3 trillion, an average of £1.3 million per company, and while the smallest companies are waiting on the smallest amounts – £68,000 on average – this is proportionally much bigger due to their small size.
At 19% of their turnover, micro SMEs’ trade debt is proportionally higher than any other group – small firms are waiting on just less than £1 million, or 17% of turnover, and medium-sized organisations are waiting on 13% of turnover, an average of about £3.7 million.
“This research highlights there is a highly varied national trade debt picture emerging within the SME marketplace, created by unpaid and outstanding invoices,” said Debt Guard Solicitors COO Mark Burgess.
“In the past SMEs have been lumped together when it comes to debt management, but it is clear that micro SMEs in particular need much greater support in this respect as they often have to wait longer for payment from larger companies.”
The study revealed that one in eight micro SMEs are facing dangerously high trade debt equivalent to as much as a third of their turnover.
And they are being forced to wait the longest for payment, too – 63 days, compared to 47 days for small firms and 40 days for medium-sized entities.
Mr Burgess continued: “As the backbone of the UK economy many of these micro firms are suffering from big trade debt issues with the threat of closure a real danger.
“Our message to all suppliers in this position is don’t write off your debt and look at legal ways to professionally recover it.”