A new report by bank payment company GoCardless reveal that the cost of living crisis, among other factors, has impacted business operations among SMEs.
The Pursuing Payments report found that 55 per cent of SME leaders are worried that the number of late-paying customers will increase in the next 12 months, a major concern given that 50 per cent of respondents admitted they avoid awkward money conversations. And 19 per cent of respondents have estimated that their business loses between $6000 and $30,000 from late payments annually.
Additionally, 86 per cent of SME leaders who have avoided money conversations with customers in the past 12 months say there has been some impact from avoiding such conversations. Millennials are more than twice as likely as Baby Boomers to agree that they’d feel uncomfortable asking customers for payment (42 per cent for millennials compared to 20 per cent for Baby Boomers).
When it comes to feeling ‘awkward’ about money, 62 per cent of millennial business leaders have said that they’d feel uncomfortable chasing customers for late payments, compared to 40 per cent of Gen X and 36 per cent of Baby Boomers.
Half of all millennial business leaders also agree they now find it harder to talk about money with customers than before the rise in the cost of living. 70 per cent of millennials are also concerned that their problem of late-paying customers might worsen this year as the cost of living rises.
However, most Millennials and Gen X (85 per cent and 68 per cent, respectively) are more likely than Baby Boomers (51 per cent) to be interested in introducing technology such as automated invoicing or payment platforms to get paid more quickly.
The data also noted a gender gap in payment confidence, with 29 per cent of women agreeing they’d feel uncomfortable asking customers for payment, rising to 46 per cent when it comes to chasing late payments. However, only 26 per cent of men feel uncomfortable asking for payments and 40 per cent share this experience chasing payments.
“Despite some optimism emerging late payments will continue to cause a cashflow crunch for already struggling SMEs in 2024 – businesses need to acknowledge this and adapt quickly to stay on top,” Luke Fossett, General Manager, at GoCardless, said.
“For those wishing to avoid more uncomfortable money conversations, there are practical solutions, such as avoiding payment options with high failure rates, automating follow-ups on unpaid invoices and offering payment methods that reduce the onus on your customers such as Direct Debit or PayTo, which automatically pull money from a customer’s bank account,” Fossett added. “For recurring payments, all they need to do is set up the payment once and then forget about it.”