SMEs lose nearly one working day every month chasing late payments

New research from Howden has revealed that despite new government measures designed to tackle late payments, the issue continues to put significant pressure on UK SMEs.

The survey found that nearly one in three SMEs receive late payments often or very often, while more than half experience them at least occasionally. Almost one in five report the problem has worsened over the past year, indicating that payment issues are still widespread.

Almost a third of businesses spend more than six hours each month chasing overdue invoices, the equivalent of nearly a full working day lost to administrative tasks rather than growing their business.

According to UK government data, late payments contribute to the closure of around 38 businesses every day in the UK, highlighting the scale of the challenge facing SMEs.

The research shows that more than a third of SMEs (34.5%) are experiencing cash flow problems because of delayed payments. The impact extends far beyond short-term financial pressures, with nearly one in seven businesses forced to delay investment and growth plans, while others defer supplier payments or rely on credit facilities simply to maintain day-to-day operations.

The effect is also being felt across the wider economy. Government-backed research found that late payments cost the UK economy almost £11bn each year, placing a significant burden on businesses and restricting their ability to invest, grow and create jobs.

While a smaller proportion of SMEs (4.3%) report delayed wages because of cash flow issues, the impact can still be significant, affecting employee satisfaction, retention and morale.

As a result, many SMEs are forced into short-term, reactive decisions that can undermine long-term stability, with nearly one in five writing off unpaid invoices entirely. Meanwhile, one in ten is relying on overdrafts or external credit, whilst 6.4% are delaying hiring, directly impacting future growth

Robert Keene, Managing Director of Commercial, Howden, said “Too many businesses are stuck reacting to late payments. Trade credit insurance changes that, giving businesses the insight to trade with the right customers, the protection when things go wrong and the support to avoid time-consuming debt recovery. Ultimately, it allows SMEs to focus on what matters most – growing their business with confidence.”