Clients are sitting on payments for creative services companies for an extra month, with the average invoice last year being settled 27 days late, leaving businesses struggling with cashflow issues which could potentially force them to go under.
That is the stark conclusion of a new study from fintech business lender MarketFinance, which examined over 5,000 invoices from the sector.
With businesses operating in the creative industry typically smaller companies – such as agencies and consultancies – getting paid late can have damaging consequences. These smaller firms are already beholden to lengthy payment terms, meaning many are waiting more than 90 days before their invoices are paid anyway.
The analysis suggests that businesses typically agree 45-day payment terms from completion of work or delivery of goods yet 44% of invoices issued in 2019 were paid late. While this was a marginal improvement on the 48% in 2018, strikingly, the number of days an invoice was paid late more than doubled in 2019 to 27 days from 13 days late in 2018.
Late payment trends have steadily improved over the years for creative businesses but 2019 signalled a shift where invoices were taking longer to settle.
MarketFinance external relations director Bilal Mahmood commented: “This is a thriving sector in the UK economy which is being undermined by late payment practices. Landing a big project for companies in this sector can, often, be a breakthrough moment. Being hindered by long payment terms and, worse still late payments, can really derail these young businesses.
“It’s unfair for businesses to have to wait to be paid beyond what is agreed. Late payment practices harm business cashflow, hamper investment and, in extreme cases, can risk business solvency.
“Government measures such as the Prompt Payment Code and Duty To Report have helped create awareness but need more bite. Until this happens, there are ways for SMEs to fight back against the negative impact of late payments, from having frank discussions with debtors that continuously fail to adhere to agreed payment terms, to imposing sanctions on those debtors, or seeking out invoice finance facilities to bridge the gap.”