Late payments costing Leeds businesses £10,000 a month

Small business in Yorkshire’s biggest city are owed an average of more than £10,000 each month owing to late payments, new research shows.

Analysis has revealed that the average small business in Leeds is owed £10,4001 in late payments at the end of any given month.

This figure equates to come five months’ worth of average staff wages.

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In total, some 83 per cent of Leeds’s small businesses were owed money in an average month.

SMEs are out of pocketSMEs are out of pocket
SMEs are out of pocket

The analysis comes from Xero and is based on hundreds of thousands of invoices from its Leeds-based subscribers.

Further analysis from 2019 in Leeds found:

- The typical overdue invoice was paid 15 days after the due date.

- On average, half of small businesses in Leeds were operating in the red throughout 2019.

Leeds skylineLeeds skyline
Leeds skyline
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- They experience the tightest squeeze in January (only 45 per cent cash flow positive), with payments owed late by 18 days on average, the highest for the year.

Donna Torres, Director of Small Business at Xero said: “Late payment is very damaging to Leeds’ small business.

“The knock on effect is huge, impacting cash flow and more generally contributing to the city’s recent decline in real productivity.

“Steps have been made to make it fairer for small businesses, but more needs to be done to guarantee faster payments.

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“It could be time for a review on how we equip business owners with the right skills and tools to survive”

The data is published after Siemens revealed that Yorkshire is home to the highest level of companies experiencing cash flow issues in the UK.

Siemens Financial Services (SFS) estimates that £1.6bn could be freed up for SMEs in the manufacturing sector in Yorkshire & Humber through the use of invoice finance.

The report, entitled ‘Trapped Cash in the Manufacturing Sector - Yorkshire & Humber’, claims that on average, firms in Yorkshire are made to wait 43 days before they receive their money, six days more than the national average.

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The manufacturing sector is an important part of Yorkshire accounting for 13.6 per cent of the region’s output, well above the UK average, and is a sector largely made up of SMEs which operate within a complex supply chain involving firms across the UK and the world.

This makes them more risk of cash flow problems than their larger counterparts.

Pat Madden, Invoice Finance Head of Sales – Yorkshire & Humber, Siemens Financial Services said: “Yorkshire & Humber makes significant contributions to British manufacturing and yet its SMEs have the worst average for bill payment in the entirety of the UK.

“With as many as 40 per cent of its SMEs suffering cash flow issues, manufacturers in the region are increasingly seeking out viable alternatives to manage the financial shortfall.

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“Flexible solutions such as invoice finance enable SMEs to take the reins when it comes to cash flow and direct funds back into the business for future investment.”

According to the Federation of Small Businesses, around 50,000 small businesses go under every year because of late payments.

Even for those companies that manage to absorb late payment, the loss of income can stop small businesses from investing and growing.