Skip to content

Aged Debts Explained for SME Owners

Any SME owner will tell you that one of the secrets of success to running your own business is finding a way to maintain a healthy cash flow.  However, this is not always easy, so many small business owners are facing the challenge of long delays in payment from companies they supply.  The B2B supply chain is what keeps Britain working and thriving – small businesses who provide products, materials or services to larger businesses are vital to the British economy.  However, with larger companies are often the main culprits when it comes to late payments, leaving their suppliers often struggling to manage on a much lower cash flow. 

A survey carried out earlier this year revealed that more than a third of SMEs claim that chasing debts is affecting their cash flow, with 58% of businesses saying they are owed up to £10,000 and more than 25% owed more than £20,000!  Half of those surveyed disclosed that outstanding debts like this have prevented them from investing in their business.  This means that more than half of SME owners in the UK are finding it difficult to grow their businesses due to late payments, or aged debts.

Now an aged debt is not a debt that’s drawing a pension!  This is the term used to describe a debt that is overdue by at least one or more given periods.  With payment terms usually 30 days long, many larger companies will take longer than this to move the invoice through their system and settle the debt.  This practice regularly leaves 30% of small UK businesses who are owed money having to consider taking out business finance to cover cash flow issues caused by late payment, burdening them with the extra expense of borrowing money to cover funds owed to them! 

With half of the UK’s small businesses prevented from investing in their business to increase it to its full potential, this is not just bad for business, it’s bad for our economy as a whole.  The UK economy depends heavily on the SMEs that comprise a massive 99.3% of all private sector business in Britain, accounting for 52% of all private sector turnover.

When surveyed, 72% of small business owners said that they spend up to three days each month chasing up overdue payments, which is costing them on average £11,000 annually.  This is time that would be more profitably spent on running or growing their businesses.  A worrying 40% of small business owners divulged that they do not have a clear debt recovery procedure, which could be drawing out the process of debt consolidation.

These figures are cause for concern for business owners here in the UK.  With so many SME owners surviving on slim profit margins and facing limited amounts of time to spend on planning business growth, just staying in business is a challenge in itself.  This is one of the reasons that B2B debt recovery services offer a no-win, no-fee service to encourage small business owners to take the next step and bring in the professionals when faced with continuing late payments.