Late payments hit two year high for small businesses

Payments to small businesses were made on average 8.2 days late in September. This is the highest late payment time since August 2020 according to the latest data from Xero, the global small business platform.

Xero’s Small Business Index, based on anonymised and aggregated data from hundreds of thousands of small businesses, found that in the UK invoices are paid significantly later than they are in Australia (6.5 days) and New Zealand (6.2 days).

In September, small businesses waited an average of 30.6 days to be paid by their customers – an increase of 0.6 days compared with August. This represents the longest payment times for two years, putting growing pressure on cash flow and their ability to pay staff and rising bills.

Alex von Schirmeister, UK Managing Director, Xero, said: “The reversal of the tax measures announced in the last Government’s mini-budget has left small businesses in limbo at a time when they need stability. It’s critical that they are paid on time so they can manage their cash flow and handle rising costs. We urge our new Government to ensure that hard-working owners of these small businesses are protected.

“We need to see tougher penalties for those big businesses flouting agreed payment terms, and policies implemented that require more transparency in regulation and reporting around late payments.”

Overall, the Xero Small Business Index fell to 87 points in September. This is the lowest reading of the UK index since February 2021, as small businesses continue to battle late payments and slow sales growth.