Late payments cost UK SMEs more than £2billion a year
Published: 26 July 2017
Small and medium-sized enterprises (SMEs) in the UK are facing a total bill of £2.16billion to chase overdue payments, according to Bacs Payment Schemes, the company behind direct debit in Britain.
This figure comes in spite of a dramatic drop in the overall late payment debt, with new figures showing that UK SMEs are owed £14.2billion, in contrast with five years ago when the total was more than double at £30.2billion.
Out of the 1.7 million SMEs in the UK, almost 640,000 say they have to wait beyond agreed terms for payments. Scotland has the highest percentage of SMEs reporting late payment issues (46 per cent), followed by Northern Ireland (39 per cent) and England (37 per cent), while just over a third of Welsh SMEs (34 per cent) say they experience late payments.
Nearly two in five companies are spending up to four hours a week chasing late payers, while 12 per cent of SMEs employ someone specifically to pursue outstanding invoices.
Almost one in five SMEs affected by overdue settlement admit that being owed between £20,000 and £50,000 would be enough to drive them into bankruptcy, with seven per cent of businesses saying they are already in this danger zone.
Of the SMEs facing late payments, 16 per cent struggle to pay their staff on time, while 28 per cent of company directors have reduced their own salaries in order to keep essential working capital inside their businesses. Nearly a third (32 per cent) say that overdue invoice settlement forces them to pay their own suppliers late. A quarter rely on bank overdrafts to make essential payments, and 15 per cent find it difficult to pay business bills on time.
A significant issue for SMEs is the amount of time they are being kept waiting beyond their previously agreed payment terms. Almost a third of companies face delays of at least a month beyond their terms and nearly 20 per cent have to wait more than 60 days before being paid.
Mike Hutchinson, director of scheme support and development at Bacs, says: "Falling late payment totals is welcome news for SMEs and for the wider economy. It’s good to hear that relatively simple measures like collecting money by direct debit or insisting on payment by Bacs direct credit are helping to keep SMEs out of the late payments trap. We’d advise all businesses to investigate if automated payments can help them control their cashflow more effectively."
