# Half of small businesses operating in the red, according to analysis of 250K SME database
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-05-02
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: UK Small Business Cash Flow Trends and Late Payment Analysis
Meta Description: Discover expert panel's real-time analysis on cash flow trends & late payments in UK small business sector. Stay informed to protect your business.
URL: https://financedigest.com/half-of-small-businesses-operating-in-the-red-according-to-analysis-of-250k-sme-databasehtml

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_Only 49.9 per cent of UK small businesses were cash flow positive on average last year – and real-time trend reflects consistent decline_

_UK small businesses feel the cash-flow squeeze, with over half of invoices paid late last year_

_Expert panel call for greater disciplinary action to end late payment ‘disease’ – FTSE 350 companies pay invoices 16 days late on average, with Food Producers and Construction sectors on the ‘watch list’_

_New online dashboard unveiled by expert panel, including Office of the Government’s [Small Business](https://www.financedigest.com/small-businesses-run-out-of-cash-before-they-run-out-of-potential.html "Small businesses run out of cash before they run out of potential") Officer, provides rich monthly analysis, giving policy and industry decision makers accurate and timely statistical insight into the health and productivity of the nation’s small businesses_

New analysis from data selected from 250,000 SMEs has found that on average fewer than half of [UK small businesses](https://www.financedigest.com/small-businesses-and-scams-what-you-need-to-know.html "Small businesses and scams: What you need to know") (49.9%) were operating in positive cash flow in 2017.

The indicator showed that over the past year, 30-day invoices were on average paid after 40 days nationwide, but the UK’s [biggest businesses](https://www.financedigest.com/truic-evaluates-the-biggest-business-incorporation-companies-in-the-us.html "TRUiC Evaluates The Biggest Business Incorporation Companies in The US") (FTSE 350) delayed payment to SMEs by 16 days beyond terms (averaging 46 days).

According to the data, in 2018, the national average to get paid has increased to 42 days, [putting strain on already cash-strapped SMEs](https://www.financedigest.com/putting-smes-first-the-alternative-to-the-overdraft.html "Putting SMEs first: the alternative to the overdraft"). The index reveals [that small businesses](https://www.financedigest.com/pakistan-floods-add-to-pain-for-struggling-small-businesses.html "Pakistan floods add to pain for struggling small businesses") experience the tightest cash-flow squeeze in the first quarter of the year, dipping to a low of 46.4 per cent in January 2018. Over the past year, [cash flow](https://www.financedigest.com/covestro-sees-lower-2023-profit-cash-flow-as-macro-challenges-prevail.html "Covestro sees lower 2023 profit, cash flow as macro challenges prevail") positivity hit highs of 51.7 per cent (October) and 50 per cent (November).

The [Small Business Insights](https://www.xero.com/uk/resources/small-business-insights/) index from cloud accounting software company Xero has been released alongside an investigation into FTSE 350 sector payment habits, which has singled out a ‘watch list’ of consistently late paying sectors that are putting extra strain on small business cash flow. Topping the list were [Food Producers](https://www.financedigest.com/britains-binge-on-cheap-food-is-over-biggest-chicken-producer-says.html "Britain’s binge on cheap food is over, biggest chicken producer says") (averaging 60 days), Construction and Materials (averaging 57 days), and Household Goods (averaging 53 days).

FTSE 350 companies in the Pharmaceuticals and Biotechnology sector were revealed to pay the most inconsistently, with invoices being paid an average of 47 days in 2017 – with a high of 68 days in June 2017.

With the Government vowing to eliminate “the continuing scourge of [late](https://www.financedigest.com/why-late-payments-are-hurting-your-customer-as-well-as-your-business.html "Why late payments are hurting your customer, as well as your business") payments”, experts on the Small Business Insights panel warned of the importance of protecting small businesses from the impact on cash flow and the overall economy.

Vicky Pryce, economist and previous Director General for Economics at the Department for Business, Innovation and Skills, commented: “The impact of [late payments](https://www.financedigest.com/how-big-is-the-late-payments-crisis-and-who-will-break-the-deadlock.html "How big is the late payments crisis and who will break the deadlock?") on the economy cannot be exaggerated. Work done by the European Commission looking at both [business to business and government to business payments](https://www.financedigest.com/technology-is-a-tonic-for-late-business-payments.html "TECHNOLOGY IS A TONIC FOR LATE BUSINESS PAYMENTS") found that late payments were directly associated with worsening firms’ cash flow positions, and particularly for smaller firms.  Many are left with no option but to request extensions of overdraft facilities and increases in their [financing costs and in bank](https://www.financedigest.com/open-finance-and-smart-ecosystems-wont-wait-for-banks.html "Open Finance and Smart Ecosystems Won’t Wait for Banks") borrowings. Late payments prevent the [economy from reaching its productive](https://www.financedigest.com/why-building-new-products-for-a-circular-economy-is-essential-if-we-are-to-preserve-the-earths-finite-resources.html "Why building new products for a circular economy is essential if we are to preserve the Earth’s finite resources") potential.”

In recent days, The Small Business Commissioner Paul Uppal has been quoted referencing the potential for harsher penalties for [big](https://www.financedigest.com/how-china-became-big-business-for-twitter-from-blocking-to-blue-checks.html "How China became big business for Twitter, from blocking to blue checks") business who disregard payment terms, saying “I’m not saying we can’t change the culture \[of late payment\] just by having conversations and highlighting issues, but we cannot deny the reality – the ability to fine would bring more gravitas to the role.

Commenting on the Xero Small Business Insights data, Paul Uppal said: [“Small businesses are crucial](https://www.financedigest.com/why-seo-is-crucial-for-business-success-post-pandemic.html "Why SEO is crucial for business success post-pandemic") to the health of our economy so it is vital that they feel supported in all areas, but particularly in the fight against late payments. My role as Commissioner exists to help small businesses get paid on time, and while the [Government works](https://www.financedigest.com/uk-minister-says-government-will-work-with-obr-on-economic-forecasts.html "UK minister says government will work with OBR on economic forecasts") on measures to address the late payment epidemic, businesses should not be afraid to come to us for help. Now is the time to make Britain the best place for entrepreneurs to flourish.”

Xero UK’s managing director and co-founder Gary Turner, commented: “Small businesses are the backbone of the British economy, however there is little by way of accurate and timely statistical insight into their [health and productivity](https://www.financedigest.com/innovation-at-periodic-intervals-to-upscale-the-eye-health-products-market.html "Innovation at periodic intervals to upscale the Eye Health Products Market").

“Sharing this insight and considering it in the context of the [challenges small businesses face](https://www.financedigest.com/how-to-overcome-the-challenges-faced-by-women-in-business-3.html "How to Overcome the Challenges Faced by Women in Business") will help the small business community gain a deeper understanding of the collective experience.  We hope that greater collective understanding of the small business economy will help firms, and their suppliers, [develop their own economies of scale and so help them to close](https://www.financedigest.com/closing-the-door-before-the-horse-bolts-developing-a-proactive-network-detection-and-response-ndr-strategy.html "Closing the door before the horse bolts: Developing a proactive network detection and response (NDR) strategy ") the gap on larger enterprises which traditionally benefit from those economies.

“It will get people talking, creating new ideas and [driving for growth](https://www.financedigest.com/football-shoes-market-globally-expected-to-drive-growth-through-2021-2031.html "Football Shoes Market Globally Expected to Drive Growth through 2021-2031") – and that is where future success lies.”

For more information visit Xero Small Business Insights at [https://www.xero.com/uk/small-business-insights/](https://www.xero.com/uk/resources/small-business-insights/).


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