Alarming statistics show 20% of business owners are not paying themselves amid cash flow concerns, a new report from Hitachi Capital Business Finance revealed.
40% of SMEs say that they are taking legal action against customers who are not paying or are paying late. These late or non-payments are having a detrimental effect on cash flow and dramatic cuts are necessary in order to prevent businesses from going into insolvency. The number of business owners not taking salaries increase to 40% in companies of less than 10 employees.
The late payment epidemic is hitting the UK’s small business sector hard; 62% of businesses surveyed said that they are struggling with late payments and the report concluded that there has been a 13% rise in businesses who have chosen to take legal action in order to recover late payment. It’s not just salaries for business owners that are at risk; companies are reporting that they are unable to pay suppliers and 35% have been forced to seek short term borrowing in order to cover shortfalls in cash flow.
Hitachi Capital also reported the following figures:
- 38% of business owners reported that late payment placed a huge strain on their supply chain, with 31% noting that this had a damaging effect on relationships with suppliers, clients, and customers.
- Bank charges due to short term borrowing are a concern to 44% of sole traders.
- 50% of SMEs working in medical & health services claimed late payment issues were damaging business relationships and their supply chain. This is 12% higher than the national average.
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