Research by Liberis, a leading small Business finance provider, has revealed that 72% of SMEs are spending up to 3 days every month chasing money they’re owed. This is costing each business an average of £5,000 per year in time spent trying to recover these funds.

The survey also found that a quarter of SMEs are chasing ‘aged debt’ of over £20,000. But on average, survey respondents are owed £11,000, so to put this into context using official figures, there are 5.7 million SMEs in the UK, meaning business owners are potentially chasing £14.9 billion in late payments. The resounding effect of this has led to SMEs not being able to invest money into their own Businesses.

The Problems with Aged Debt

Over a third of surveyed SMEs say aged debt is affecting their cash flow, with half of all respondents stating that unpaid bills have prevented them from investing in their business. Some of the key issues respondents mentioned were : “not being able to buy new equipment”, “not being able to pay or hire staff” and having to “put plans to expand their business on hold”.

One employee said: “I worked at a small business for just over a year and my time was often taken up by chasing aged debt. There were months where there were issues paying staff on time and the company was always struggling to invest”.

What Role do Small Business Owners Play? 

40% of businesses explained they don’t have a clear debt recovery process, In addition, 30% of small businesses said they have or would consider sourcing additional business finance to cover cash flow issues from debtors. Add to this that 72% of the SMEs spend up to three days a month chasing invoices and it becomes clear that smaller businesses are frequently surviving on slim profit margins, with a limited amount of time to invest in growing their business.

Small businesses want to be able to maximise their buying power for greater profitability, but don’t have the initial investment required. Seeking a business cash advance is one short term solution to plug a cash flow gap but changing payment terms and being stricter with credit control can ensure that businesses aren’t chasing mounting unpaid bills in the future.

Retailers Are the Most Affected by Aged Debt

Those most affected by unpaid debt (21%) were from the retail industry, double that of small businesses in the I.T and tech sectors (8%). Both of these industries rely heavily on the performance and quality of their technology, and with the majority of respondents saying that the amount of outstanding debt prevents them from investing in equipment, this suggests that debt is more than just a cash flow issue: it stops businesses from seizing opportunities to grow.

“Rob Straathof, CEO at Liberis, said “The government continually stresses the importance of small businesses to the nation’s economy, but with mounting debts owed by their clients and customers, some SMEs are at breaking point, which could have a knock-on effect on Britain’s financial state.

Better management of cash flow is essential for survival, but not all business owners are aware of the available channels to collect outstanding balances and often fear damaging a relationship with a client. However, relationships aside, businesses are severely hamstrung by irregular cash flows so owners should make themselves familiar with legal avenues to help them recuperate the money they are owed.”

About Liberis

Liberis is a leading alternative finance provider, offering simple, flexible and transparent funding to help UK Small Businesses achieve their ambitions.

Established in 2007, in a space where traditional banking and loan models were unable to meet the needs of UK Small Businesses, Liberis provides finance based on business potential, not just credit history.

Through its Business Cash Advance, an innovative form of funding, Liberis links repayments directly to cash flow so businesses only repay when their customers pay them.

Liberis is in partnership with British Business Investments – the commercial arm of the British Business Bank; and is backed by Blenheim Chalcot, the UK’s leading venture builder. Liberis operates the platform behind Small Business funding programs of several renowned UK partners such as Worldpay, Sagepay and JustEat. Through these partnerships, Liberis has a direct reach of over 750,000 UK small businesses.

To date Liberis has helped over 7,000 Small Businesses, advanced £210m in funding through Business Cash Advance[1] and supported over 35,000 jobs in the UK.[1]

For more information, please visit https://www.liberis.co.uk/blog/Small-Business-Survey-Aged-Debt

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Survey Methodology

Liberis surveyed over 400 SMEs within the UK between 19/03/2018 – 22/03/2018 to discover how aged debt has affected their business. Respondents were asked 10 questions regarding their annual turnover, the amount they are owed and if aged debt has prevented investment in growing their business. Liberis then analysed the results.