The average time a small business has to wait to be paid clients has crept back up to 31 days.
The average time a business had to wait in January to be paid rose by 0.6 days to 30.5 days.
Last month on average small businesses were made to wait 8.4 days later to be paid than agreed payment terms, according to accounting software Xero.
The latter is the highest level since August 2020 during the first lockdown when late payments soared, and the rise reverses a long-term improvement in both metrics recorded in 2017.
>See also: Sole traders pay most tax since records began
Xero analyses data from the accounts of hundreds of thousands of small businesses that use its software to come up with the findings.
Grant Shapps announced a review of late payment policy in December when he was business secretary, saying: “That many small firms are routinely paid late is intolerable and presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.”
He said that a consultation on the review, which runs until April 28, would “build on the success we have had so far in curbing late payment”.
>See also: Four-day work week found to boost revenue
Alex von Schirmeister, UK managing director, Xero, said: “It’s unacceptable that payment times to small businesses continue to rise. The outcome of the UK government’s late payments consultation cannot come soon enough – small businesses are critical to our economy and communities, but can’t drive UK growth without stricter policies to protect them.”
Inflation erodes any sales growth…
Xero found that headline average sales growth for small businesses in January was 5.1 per cent, following a 2.7 per cent in December, but both increases were completely eroded by inflation. Taking inflation into account, sales fell 6.5 per cent in December and 3.7 per cent in January, Xero said.
…as wages bills rise by 5% year on year
Meanwhile, UK small business wages have risen to their highest level since May 2022 as many firms battle to attract and retain employees in a competitive market. Small business salaries rose by 4.8 per cent year on year in January.
“Despite increasing wages and some improvement in employment levels, we know that small businesses are still struggling to find the workers they need,” said Von Schirmeister. “National vacancy levels have softened but are still high by historical standards. This is forcing many business owners to offer larger pay rises to keep or attract new staff.”
And although the number of people employed by small businesses declined by 2.5 per cent year on year – the tenth consecutive month of year-on-year jobs decline – it was the smallest drop since April 2022, indicating the mooted recession may have bottomed out.
Indeed, small businesses in London actually employ more people than they did a year ago, showing a 2.2 per cent increase year on year.
Budget 2023 what small business can expect
#Average #wait #time #paid #days