With late payments costing SMEs £22,000 a year and 56 million hours in lost productivity, new research has revealed the UK sectors most affected by late payments.1

The FSB has described late payments as one of the “biggest problems” facing small businesses. As a result, the government has announced plans to crack down on late payments with stricter laws to help smaller businesses and grow the UK economy.

With this in mind, the business finance experts at money.co.uk business credit cards have analysed data from the Department for Business and Trade to show how late payments affect UK businesses.

1. Manufacturing

Businesses in the manufacturing industry are made to wait the longest to receive payments for goods and services. Businesses in this sector receive payments after around 47 days. This could be due to the industry’s complex supply chains, with multi-tiered supplier relationships slowing down how quickly payments are made.

2. Wholesale and retail trade; repair of motor vehicles and motorcycles

The wholesale and retail trade sector, which also includes the repair of motor vehicles and motorcycles, is in second place, with a median wait for payments of 36 days. This industry often has businesses operating on thin margins and relying on credit to maintain inventory. As such, payment delays could stem from customers waiting to asses the product performance before settling their invoices.

3. Agriculture, forestry and fishing

The agriculture, forestry, and fishing industries also share second place at 36 days. Given their seasonal nature, with crop, forestry, and livestock cycles affecting harvesting times, buyers often delay payments until they generate revenue from sold goods. However, this can put a significant strain on the industry’s producers.

Joe Phelan, money.co.uk business credit cards expert, offers his tips for handling late payments:

“While overdue invoices might feel like an inevitable part of running a business, there are ways to mitigate their impact. By adopting proactive measures and leveraging financial tools, SMEs can build resilience and protect their operations from the risks associated with late payments.

“Using a business credit card effectively, for example, can be a lifesaver when payment schedules don’t align. The key to this is thinking of the card as a short-term buffer rather than a long-term crutch.

“Start by choosing a credit card that offers longer grace periods – some providers do this for new customers. You should also look for cards that provide zero or a reduced introductory APR, especially if you anticipate carrying a balance from time to time. And, if they offer cashback or rewards, that is even better, as this can offset some of your expenses.

“Timing can be everything, so align your credit card payments with your income schedule as best as possible. For example, if you’re typically paid mid-month, set the card payment to be due later in the month to avoid late fees.

“Lastly, remain disciplined and make sure to pay off the balance in full wherever possible. It’s well known that credit cards can accrue interest very quickly, depending on your interest rates. It’s also better to use accounting software to manage these payments, as manual methods can lead to human error. And remember, a credit card should supplement your business’s financial plan, not replace it.”

Is this of interest to you and your readers? You can view the full report here.