Survey finds chasing aged debt is hindering retail growth, with 29% of retailers saying they are currently owed over £20,000 in overdue payments.
- 61% of retailers say aged debt has prevented them from investing in their business
- 63% are spending –up to 3 days a month chasing aged debt and 20% are spending over 7 days a month
- 29% of small retailers are due over £20,000 in late payments
Is Aged Debt Damaging our High Streets?
61% of retailers say unpaid bills are preventing their business from growing, according to a recent survey conducted by award-winning alternative finance provider, Liberis.
Retail business owners responded to the survey saying late payments have meant:
- ‘they had less money to invest in the future’
- ‘it has stopped them from investing in new equipment’
- ‘it has prevented stores releasing capital to open new outlets’
With existing threats of tough trading conditions and mounting competition from online shopping, it’s clear that chasing outstanding bills is becoming another obstacle for retailers to overcome.
Small Retailers vs. Large Chains
Liberis’ research found that 62% of small retailers with an annual turnover of up to £2,500,000 are affected by aged debt the most. However, lack of money has also affected larger businesses with Gap, New Look, Foot Locker and Michael Kors announcing store closures this year.
Small retailers went on to say that investing in up-to-date equipment and technology will be crucial for driving their business forward as well as offering excellent customer service. Meeting these expectations resulted in 23% of respondents taking out loans to bridge the cash flow gaps caused by unpaid invoices.
One small retailer who responded to the survey, said: “We are unable to hold stock and can’t invest in new products and tech” because of aged debt.
The survey supported this, with 40% of respondents currently owed up to £5000 and almost 30% over £20,000.
With smaller retailers already facing competition from larger stores dominating consumer spend, aged debt is leaving them in a desperate bid to locate additional funding.
Small retailers are wasting time chasing late payments
63% of retailers surveyed are spending up to 3 days a month chasing late invoices, while 20% are spending over 7 days a month. One SME was even pushed to employ extra staff to chase the outstanding income and cover time disruptions.
On the other hand, other retailers said aged debt has prevented them from hiring much-needed new staff in the last six months.
One respondent said: “Aged debt has had a negative effect on business health and has hampered the success of my business”.
With a lack of cash flow, smaller retailers are left unable to invest in their businesses and react to industry changes. Whether the problem lies with clients failing to pay or poor in-house debt recovery procedures, their limited resources and means for investment are undoubtably hitting them the hardest.
“Rob Straathof, CEO at Liberis, said “The government continually stresses the importance of small businesses to the nation’s economy, but with mounting debts owed by their clients and customers, some SMEs are at breaking point, which could have a knock-on effect on Britain’s financial state.
Better management of cash flow is essential for survival, but not all business owners are aware of the available channels to collect outstanding balances and often fear damaging a relationship with a client. However, relationships aside, retail businesses are severely hamstrung by irregular cash flows so owners should make themselves familiar with legal avenues to help them recuperate the money they are owed.”