Six out of 10 invoices issued by SMEs remain unpaid within the debtor day period, according to new research.
The report from Amicus Commercial Finance shows that 70 per cent of firms rely on getting paid during their debtor day period to avoid a potential shortage of working capital.
Sixteen per cent of invoices remain unpaid after 90 days and, of these, seven per cent have still not been settled after six months.
Firms with between 50 and 249 employees are the worst affected by delayed payments, with 24 per cent of invoices remaining unpaid after the debtor day period - or not at all.
The report said delayed payments can have serious consequences because many SMEs are reliant on a small number of customers - the research found that firms' top three customers on average account for 49 per cent of overall revenue.
In addition to financial implications, there are also psychological consequences to late payments. More than a quarter of business owners (28 per cent) said they had caused considerable stress and anxiety, while 19 per cent said their frustration had turned to anger. One in 10 admitted to fearing their business would go bust.
"Invoice payment terms are all too often ignored and for small firms this can put their cashflow under intolerable pressure, particularly when late payers are also large customers," said John Wilde, managing director of Amicus Commercial Finance.
"For business owners with healthy sales, the frustration of being forced to take out business loans or extend their overdraft to avoid becoming insolvent can be overwhelming."