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How businesses can cope with an increase in late payments

With businesses facing soaring energy costs, rising interest rates and a cost-of-living crisis, late payments can put their future in danger.

According to a new survey, the average time a small business has to wait to be paid by clients has crept back up to 31 days. January saw a sharp spike in the average time a business had to wait to be paid, which rose by 0.6 days to 30.5 days.

On average small businesses were made to wait 8.4 days beyond the agreed payment terms, according to accounting software Xero.

That is the highest level since August 2020 during the first lockdown when late payments soared, and the rise reverses a long-term improvement in both metrics recorded in 2017.

What can be done?

There are several ways businesses can avoid the scourge of late payments, including:

Action to take if that fails

Xero analyses data from the accounts of hundreds of thousands of small businesses that use its software to come up with the findings.

Alex von Schirmeister, Xero UK Managing Director, said: “It’s unacceptable that payment times to small businesses continue to rise. The outcome of the UK Government’s late payments consultation cannot come soon enough – small businesses are critical to our economy and communities, but can’t drive UK growth without stricter policies to protect them.”

Need advice on dealing with late payments and deciding what action to take? Contact us.

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