Research by Oxygen Finance has identified that if all businesses cleared outstanding late payments this would cascade billions of pounds through the UKs business supply chain, giving firms an unprecedented cash injection as they recover from Covid and Brexit
It is estimated that on average the 5.9 million small businesses which employ 61% of the UK’s workforce are owed between £5,000 and £6,500 in late payments. If all these late payments were settled now, this would inject a massive £30 billion into the economy.
Ben Jackson, Chief Executive of Oxygen Finance put the figure into context, saying: “Releasing this amount of cash into businesses would have unprecedented benefits for the UK economy. Most of these payments are contractually late and just pass on business stress and anxiety from one firm to another. It is often small firms failing to pay other small firms because they have not received payment from the people they supply. It is a negative circle which holds back growth, leads to unemployment and through good business practice can be stamped out.”
Covid has cost the UK over £330 billion and the simple act of getting firms to pay early – for the services and products they have already received – could immediately put 10% of this amount into circulation. For many businesses this injection of liquidity would be a lifeline as they need to rebuild after Covid.
“We have just looked at small businesses but from the companies we work with we know that delaying payment happens between all firms, large or small. There is often a belief that failing to meet contractual obligations and keeping cash flow positive is a good business strategy. The problem is that doing this can destroy the suppliers and partners these firms rely on. It is short-term and negative, suppressing rather than encouraging growth.” added Mr Jackson.
Oxygen believes the UK is going through unprecedented times, which allows for new approaches and a rethinking of the business playbook. Accepted behaviours can and should be challenged, to develop better business processes.
As a business we advocate the incentivisation of early payments, focusing on larger suppliers which allows smaller businesses to be paid early without charge. There can be a reticence over introducing a cost so that the supplier receives their payment ahead of the contractual target. However, this needs to be seen in the context of the hidden cost’s firms absorb as they wait for late payments, including overdraft and credit facilities. The incredible success of local authorities supporting their suppliers with voluntary early payment schemes shows what can be achieved. If all UK businesses adopted the same approach the benefits for the country would be huge.” concluded Mr Jackson.
Oxygen Finance is the leading firm in the UK providing fintech accountancy based early payment solutions and works with a range of public and private sector companies to maintain supply chain liquidity as a way of supporting business investment and success.