If you received this month’s CPA newsletter, you’ll have seen our report about trade debt – the combination of outstanding and overdue invoices – and how research has shown it is a particular problem for the smallest of companies.
With smaller overall cash flow, a smaller quantity of trade debt can leave micro-businesses without access to a greater proportion of their working capital.
The figures from specialist solicitors Debt Guard showed that the average trade debt among micro-businesses is equivalent to 19% of turnover, compared with just 15% among larger firms.
But across the board, UK companies are now waiting on payments worth an estimated £6.3 trillion, and that equates to an average of £1.3 million per company.
Larger firms are shouldering much of that – among micro-SMEs with fewer than ten employees, the figure drops to ‘just’ £68,000.
But as a proportion of total turnover, this is more troublesome for the small firms than the £1 million or more owed to their big-brand counterparts.
Some 12% of the smallest firms consider themselves to be in severe debt trouble, compared with just 5% of large firms – and 44% of all high-risk companies are in London, suggesting that it is not only private households that find the affordability of the capital to be a strain.
Mark Burgess, chief operating officer of Debt Guard, said: “In the past, SMEs have often 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 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.”