Working Capital Tied Up as Payment Terms Lengthen
UK small business confidence has collapsed. A new analysis by the Credit Protection Association reveals that £26 billion of SME capital sits in overdue invoices. This isn't spare money. It's money customers owe for work already delivered—wages, supplier payments, tax bills and growth investments that SME owners urgently need.
The picture is grimmer than the headline figures suggest. Expansion confidence among SMEs has fallen from 50% last year to just 41%, the weakest in CPA's records. Funding appetite is worse: only 40% of SMEs now plan to seek outside finance, down from a peak of 63% in autumn 2023. Rising interest rates, fuel costs, shop prices, tax uncertainty and market volatility are all squeezing margins.
Why This Matters to Your Business
If your company sells on credit, longer payment terms mean working capital leaks away. Money owed is not money in the bank. Every week a customer delays payment is a week your business operates on a tighter cash float, delaying growth, trimming headcount or cutting investment. For many SMEs, weak working capital management has tipped them toward insolvency risk.
The B&L advice: audit your debtor days now. Which invoices are overdue? Which customers are serial late payers? Tighten credit terms, enforce collection and consider supply chain finance to unlock cash early. If cash pressure is acute, speak to your accountant about cash flow forecasting and working capital review.
You cannot control your customers' payment discipline. You can control how quickly you know when cash is at risk.