Cash flow concerns see SME owners switch method of paying for insurance, says premium finance firm

Around 15% of small to medium-sized enterprises (SMEs) choose to pay for their insurance cover monthly rather than annually in a bid to better manage cash flow while struggling to make timely bill payments, according to new research from premium finance firm Premium Credit.

Its most recent Insurance Index, which polled 1,332 SME owners in March 2024, also found that 11% of respondents pay for their insurance using a lump sum.

Owen Thomas, chief sales officer at Premium Credit, said: “Premium finance is a very cost effective way for businesses to buy insurance and better manage their finances and cash flow by spreading payments.

“Our research shows more firms are switching to monthly payments for credit to buy insurance, which underlines that point.”

Cash flow concerns

Driving SMEs’ move to pay for insurance monthly is the fact that many are still struggling with their cash flow, leading to the late payment of bills, Premium Credit noted.

The Insurance Index confirmed that the late payment of bills was a growing problem for 20% of respondents, with an additional 5% of SME owners believing this challenge has worsened over the last 12 months.

More than half (52%) of respondents stated that the issue of late bill payment has remained the same for them over the past year.

Although these findings acknowledge that late bill payment is a problem in the UK SME market, Premium Credit emphasises that there has been a year-on-year improvement when comparing this year’s figures to its March 2023 Insurance Index results.

For example, last March, 28% of SME respondents cited that late bill payment issues had worsened over the prior year.

SME savings

Around 28% of SME respondents additionally reported that their savings have reduced since the onset of the cost of living crisis, including 9% that said their cash savings have dropped dramatically.

In comparison, 20% of respondents have been able to boost their cash savings over the same time period.

Thomas continued: “It is encouraging to see that the issue of late payment of invoices is easing somewhat for some SMEs, but – despite that – it still has a major impact on cash flow and business operations.”