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The problem that kills 50,000 SMEs a year

Business Cloud Article - It is well-known that the majority of startups will fail and never become successful businesses in the long-term.

Running out of cash has detrimental effects on SME's

Almost two-thirds of new businesses will be dissolved within the first 36 months, with a fifth going under in year one – a hammer blow to the economy and employment landscape.

The reasons why may be complex, from poor access to talent to high barriers to entry and failure to respond to market forces. According to research from CBInsights, the single biggest reason for failure is a lack of market need for the product or service offered (42%), followed by simply running out of cash (29%).

Many SME's are left with terminal cash flow issues

Jo Gibson, Head of SME Channel at BankiFi is unequivocal on the impact of late payments.

50,000 SMEs are going out of business every year,” she says. “The average size of late payments owed to SMEs in the UK is £6,000.”

At BankiFi we specialise in payment processing and financial administration services for SMEs, including accounting, invoicing and payments. Already working with the Co-operative Bank – with further global clients soon to be announced – we aim to embed banks within customers’ daily workflows while also providing a standalone app, Incomeing, for use by customers of any bank.

Banks need to transform how they respond to the needs of SMEs

“With the rise of FinTechs, traditional banks are in serious danger of just becoming a place where you store your money: BankiFi very much wants to help banks put themselves back at the heart of business. We want to help banks deliver all these third party services themselves.

“But we saw that there was equally an opportunity to take that service straight to the SME with Incomeing.”

She adds: “I wouldn’t dream of doing my supermarket shopping, getting to the checkout with the loaded trolley and saying, ‘I’ll pay you later’. So why do we believe that it’s okay not to pay our plumbers, our suppliers, our website designers?

Giving SME's time back is key

“Every single business which I’ve spoken to which raises invoices is having the experience of being paid late or not being paid and having to chase, and most of them really feel uncomfortable. They’re doing their financial admin at night, at weekends, when they should be out with the kids or eating their tea.

“The follow-up is stressful for them. We feel really uncomfortable being paid the money we’re owed.”

Incomeing creates a financial one-stop-shop for SME's

The platform takes advantage of open banking request-to-pay technology to equip SMEs with a tool for instant payment. “Take a typical tradesperson: they could do their invoicing whilst they’re still at their clients’ premises,” explains Gibson. “We make the facility for payment so easy that they have no excuse to not pay you there and then. The chances are that you’ll actually have the money in your bank account before you get in your car.”

Incomeing also links into major accounting packages to make invoice creation and reconciliation seamless. “You can send it to your customer via email, SMS or QR code,” says Gibson.

“All they have to do is open the request, which then takes them to their bank; they see some details; they hit pay; and you get the money instantly. It’s all about putting the money back into the hands of the SME.

Small business owners need to be paid on time 

“The financial community’s answer to the SME having no cash flow is to provide them with more debt, more credit, more buy now, pay later… that’s not the answer. If we just pay small businesses what we owe them and on time, their reliance on everything else will diminish.”

SME's need more than just another app

Paul Cooper founded Lean on Me Training in 2020. The micro business, which delivers mental health training to clients including Dixons Carphone Warehouse, recently began using the Incomeing app. “I was looking for optimum ways of operating which enabled me to deliver the thing that I did best – the training,” says Cooper.

Banks need to support SME's through innovating their services

“Businesses have always struggled with cash flow, invoicing and debt collection. Initially, I just took that on the chin, thinking it was part of the territory.”

“Unpaid invoices are an absolutely huge headache for SMEs. If you get one or two large clients who take longer than they should, or you haven’t quite mastered the art of cash in versus cash out, then that can kill you,” he says.

“When I discovered Incomeing, it was brilliant for me. It’s fast, efficient and worry-free. I don’t have to worry about keeping on top of chasing non-payment: you can set reminders and the money just comes in.”

Being paid on time shouldn't be difficult 

Jo added, “SME leaders are the ops; digital marketing; accounts; the cleaner. They’re doing everything,” she says. “They spend more time raising new invoices and getting them out – rather than chasing outstanding ones – because they feel that’s what’s helping them grow their business. 

“We’re excited to work with banks who want to support businesses on their growth journey as well as mortgages and loans.”

The BankiFi blog

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