New research from Premium Credit, the UK’s leading insurance premium finance company, reveals that while late payment issues are easing for small and medium-sized enterprises (SMEs), they still remain a significant concern.
The findings from its Insurance Index, which tracks insurance purchasing and financing trends, indicate that one in five firms (20%) are still experiencing increasing problems with late payments, with 5% noting that the issue has significantly worsened.
However, this is an improvement compared to the previous year, where 28% of firms reported worsening late payment problems, including 7% who said it had become much worse. This year’s figure is also better than the 24% recorded in the 2022 Insurance Index.
More than half (52%) of SME owners and managers surveyed this year said that the late payment issue has remained consistent over the past 12 months, a slight increase from 50% last year.
A key strategy SMEs are using to manage cashflow, identified by the study, is the growing shift towards monthly insurance payments instead of one-off lump sums. Around 15% of SMEs have switched to monthly payments for insurance, compared to 11% who have opted to pay in a lump sum.
The research also highlights that SMEs have been dipping into their savings, with 28% reporting a decrease in their savings since the start of the cost of living crisis. Among them, 9% said their cash savings have dropped dramatically. Conversely, about one in five (20%) have managed to increase their savings over the same period.
Owen Thomas, chief sales officer at Premium Credit, commented: “It is encouraging to see that the issue of late payment of invoices is easing somewhat for some SMEs but despite that, it still has a major impact on cashflow and business operations.
“Premium finance is a very cost-effective way for businesses to buy insurance, and better manage their finances and cashflow by spreading payments. Our research shows more firms are switching to monthly payments for credit to buy insurance which underlines that point.”
