# I.O.U: £24,841 owed in late payments to the average small business in the UK
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2019-01-05
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Xero Small Business Insights Reveals Shocking Scale of Debt
Meta Description: Xero's Small Business Insights reveals small businesses in the UK are owed an average of £24,841 in late payments daily, impacting cash flow and
URL: https://financedigest.com/o-u-24841-owed-late-payments-average-small-business-ukhtml

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- **_Data reveals the scale of debt the average small business is forced to deal with due to late payments_**
- **_Small business owners deal with debt equivalent to 11 months of the average staff wage, 9 family holidays or 37 months of mortgage payments –_**
- **_Xero releases statistics from_** [**_Xero Small Business Insights_**](https://www.xero.com/uk/resources/small-business-insights/) **_, a monthly dashboard offering deep insights more regularly than any other company, giving policy and industry decision makers real-time insight into the health and conditions of small businesses_**

New statistics analysed from Xero’s UK small business subscriber base shows that the average British small business is owed £24,841 in late payments on any given day. Based on data taken from 2 million invoices, this equates to 11 months’ average staff wage\*, 37 months of average [mortgage payments\*\* or 9 family holidays\*\*\* and suggests that the SMB economy could be forced to deal](https://www.financedigest.com/uk-watchdog-contacts-banks-following-huge-withdrawal-of-mortgage-deals-ft.html "UK watchdog contacts banks following huge withdrawal of mortgage deals -FT") with an average deficit of £141bn as a result of this debt.

Anonymised, aggregated data generated by thousands of UK businesses using Xero’s [accounting software](https://www.financedigest.com/is-your-accounting-software-holding-you-hostage.html "Is your accounting software holding you hostage?"), revealed that over three quarters (78 per cent) of SMBs are owed money at any one time outside of agreed payment terms. The [data showed that in August the average](https://www.financedigest.com/average-annual-uk-grocery-bill-highest-since-at-least-2008-industry-data.html "Average annual UK grocery bill highest since at least 2008 -industry data") 30 day invoice was paid after 39.67 days, almost 10 days after payment is due.  Furthermore, when reviewing overdue 30-day invoice [payments the average late](https://www.financedigest.com/the-late-payments-toolkit-how-to-keep-the-cash-flow-strong.html "THE LATE PAYMENTS TOOLKIT – HOW TO KEEP THE CASH-FLOW STRONG") invoice was found to be paid 64 days after issue, more than double the payment term.

The [industry with the highest percentage of invoices paid late was found to be Transport](https://www.financedigest.com/growing-transportation-industry-is-driving-demand-for-aluminum-sheet-market.html "Growing Transportation Industry Is Driving Demand For Aluminum Sheet Market"), Postal and Warehousing, with 68 per cent of invoices overdue over the last year, followed by Electricity, Gas, Water and Waste Services (62 per cent) and Manufacturing (60 per cent).

The top 10 [small business](https://www.financedigest.com/small-businesses-and-scams-what-you-need-to-know.html "Small businesses and scams: What you need to know") sectors on Xero owed the most from late payments on average:

01. Wholesale trade (£42,989)
02. Administration and support (£40,662)
03. Transport, postal and warehouse (£31,555)
04. Public [administration and safety](https://www.financedigest.com/improved-patient-safety-efficient-dose-administration-and-seamless-interoperability-for-advanced-infusion-delivery-are-several-advantages.html "Improved patient safety, efficient dose administration, and seamless interoperability for advanced infusion delivery are several advantages") (£31,541)
05. Electricity, gas, water and [waste services](https://www.financedigest.com/sacyr-shortlists-four-bidders-for-its-service-waste-management-unit-expansion.html "Sacyr shortlists four bidders for its service, waste management unit – Expansion") (£31,309)
06. Financial and insurance [services](https://www.financedigest.com/how-advanced-self-service-technologies-are-changing-the-face-of-finance.html "How Advanced Self-Service Technologies are Changing the Face of Finance") (£29,732)
07. Manufacturing (£29,123)
08. Information, media and telecoms (£28,682)
09. Construction (£25,880)
10. Professional, scientific and technical services (£23,554)

**Edward Berks, EMEA Director, Platform Business at Xero comments**: “At a time when the world needs small business to succeed it’s estimated that 50,000 businesses in the UK fail each year because of cash flow issues.

“Our data shows the impact that this level of [debt can have on small companies](https://www.financedigest.com/understanding-company-debt-finance.html "Understanding company debt finance"). [Predicting working capital requirements still remains a challenge for small businesses](https://www.financedigest.com/disruption-and-innovation-four-predictions-for-the-business-landscape-in-2016.html "DISRUPTION AND INNOVATION – FOUR PREDICTIONS FOR THE BUSINESS LANDSCAPE IN 2016") and accessing finance remains expensive and time consuming. But, it’s increasingly critical that the [Government and industry takes the right steps to ensure that small businesses](https://www.financedigest.com/where-do-small-businesses-turn-when-government-support-dries-up.html "Where do small businesses turn when government support dries up?") get paid faster. New measures to crack down on big business culprits and  smarter technology to automate payments will all help to alleviate the pressure on [small business cash](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") flow.”

The data is revealed as the government [announces new measures](https://www.gov.uk/government/news/government-announces-new-measures-to-boost-funding-for-small-businesses) to arm small businesses against unfair contracts that stop them raising money from unpaid invoices, as well as a [call for evidence](https://www.gov.uk/government/news/ending-late-payments-to-small-businesses) to help protect small businesses against large companies who abuse their position in the market.

Vicky Pryce comments: “In the current climate of increased uncertainty, tighter margins and a shaking out of [supply chains](https://www.financedigest.com/encouraging-female-talent-and-entrepreneurship-in-the-supply-chain-industry.html "Encouraging female talent and entrepreneurship in the supply chain industry"), late payments just add to the costs of small firms, particularly now as interest rates are on an upward trend. And needing to borrow more, in an unplanned way, does little for a firm’s [credit rating](https://www.financedigest.com/sp-global-fined-1-1-million-euros-for-premature-credit-rating-publications.html "S&P Global fined 1.1 million euros for premature credit rating publications"), making life more difficult in the future.

“Late payments tend to shift the balance in favour of larger firms either because they are the ones who benefit from paying late or can better withstand the working capital pressures if they themselves are having to cope with late payment of invoices by others. And yet it is the millions of small firms that provide around half of the employment in the UK and much of the [economy’s productivity](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") and growth depends on them functioning in a healthy finance environment.

**Three tips to improve cash flow and protect [businesses from late payment](https://www.financedigest.com/technology-is-a-tonic-for-late-business-payments.html "TECHNOLOGY IS A TONIC FOR LATE BUSINESS PAYMENTS") debt:**

1. **Be selective about who you work** with and credit check prospective clients. A bad credit history could indicate [issues with late payments](https://www.financedigest.com/exclusive-apple-hit-with-antitrust-case-in-india-over-in-app-payments-issues.html "Exclusive-Apple hit with antitrust case in India over in-app payments issues") in the future
2. **Implement interest charges** on [late payers to encourage prompt payment](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")
3. **Set automated responses:** Many accounting [software solutions](https://www.financedigest.com/why-no-code-beats-custom-software-and-turnkey-solutions-for-business-automation.html "Why no-code beats custom software and turnkey solutions for business automation") are now capable of issuing automated reminder letters when payments become overdue. [Automating the process](https://www.financedigest.com/the-implantable-biomaterials-market-to-move-ahead-on-rpa-robotic-process-automation.html "The Implantable Biomaterials Market to move ahead on RPA (Robotic Process Automation)") of sending a reminder email reduced the amount of time you have to spend waiting and chasing for payment.


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