£2bn late payment issues for businesses

THE UK’s smaller businesses are facing a bill of £2.16bn to chase overdue payments, according to Bacs Payment Schemes Limited (Bacs), the company behind Direct Debit and Bacs Direct Credit in the UK.

That’s in spite of a dramatic drop in the overall late payment debt, with new figures showing that UK small to medium-sized enterprises (SMEs) are owed £14.2bn – in contrast with five years ago, when the total was double that, at £30.2bn.

Out of the 1.7 million SMEs in the UK, almost 640,000 say they have to wait beyond agreed terms for payments.

Just over a third of Welsh SMEs (34%) say they experience late payments, the lowest percentage among the UK nations.

Scotland has the highest percentage of SMEs reporting late payment issues (46%), followed by Northern Ireland (39%) with England close behind (37%).

Thirty-nine per cent of companies are spending up to four hours a week chasing late payers, while 12% of SMEs employ someone specifically to pursue outstanding invoices.

Almost one in five (19%) of SMEs affected by overdue settlement admit that being owed between £20,000 and £50,000 would be enough to drive them into bankruptcy, with 7% of businesses saying they are already in that danger zone.

Of those facing late payments, some 16% struggle to pay their staff on time, while 28% of company directors reduce their own salaries in order to keep essential working capital inside their businesses.

And nearly a third (32%) say that overdue invoice settlement forces them to pay their own suppliers late. A quarter (25%) rely on bank overdrafts to make essential payments, and 15% find it difficult to pay business bills like energy, rates and rent when they’re due.

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% are having to wait more than 60 days before being paid.

Mike Hutchinson, from Bacs, said: “Falling late payment totals is welcome news for small to medium-sized businesses and for the wider economy.”