Calls for Government to tackle late payments to small businesses
A new study has revealed the cashflow struggles faced by small businesses across the UK, resulting in calls for Government action.
The research, conducted by Xero Small Business Insights and Accenture, discovered that the average UK small business experienced a “cash flow crunch” for more than four months every year.
A cash flow crunch is when monthly takings do not sufficiently cover outgoings.
This issue often comes hand in hand with late payments, which have worsened since the Covid-19 pandemic. Late payments are cited as one of the main reasons for a stunt in business growth.
Alex von Schirmeister, Xero’s Managing Director for Europe, the Middle East and Africa, said: “We are seeing big businesses purposely withholding cash from their small customers. We must move away from calling it ‘late payments’, which legitimises poor practice and lacks urgency. It’s time we labelled this ‘unapproved debt’.
“Given the steady post-pandemic resurgence in cash flow issues that we’re seeing in the UK, we urge the Government to help.”
According to the research, 23 per cent of small businesses experienced a cashflow crunch for over six months each year, with 94 per cent doing so no less than once during 2021.
Hospitality sector worst affected
Firms impacted most negatively were those in the hospitality sector, struggling to keep their heads above water with the introduction of Covid-19 restrictions.
As a result, most companies in the industry with negative cash flow peaked at 54 per cent in July 2020.