Jul 13, 2017

Late payments cost SMEs more than £2 billion a year

Bacs, the company behind Direct Debit and Bacs Direct Credit in the UK, have published their research into late payments among smaller UK businesses. Their research findings revealed that the UK’s smaller businesses are facing a total bill of £2.16 billion in late payments.

The findings show that out of the 1.7 million SMEs in the UK, almost 640,000 claim to have to wait beyond agreed terms for payments. When broken down, this reveals that:

  • Scotland has the highest percentage of SMEs reporting late payments at 46%
  • Northern Ireland follows with 39%
  • England: 37%
  • Wales: 34%

These findings come in spite of the drop in the overall payment debt in the UK. The latest figures show that UK SMEs are owed £14.2 billion, in contrast to £30.2 billion five years ago.

 

 

Overall, 39% of companies spend up to four hours a week chasing late payers. Some companies even have to employ someone specifically to pursue outstanding invoices (12% of SMEs).

One in five (19%) SMEs admit that being owed between £20,000 and £50,000 would be enough to drive them into bankruptcy. 7% of SMEs are already in that area and worried about bankruptcy.

Further interesting figures:

  • 16% struggle to pay staff on time
  • 28% SME directors reduce their own salaries to keep essential capital in the business
  • 32% are forced to pay their own suppliers late due to overdue invoices
  • 25% rely on bank overdrafts to make essential payments
  • 15% find it difficult to pay business bills, such as energy, rates and rent
  • Almost 1/3 of companies face delays in payment of at least a month
  • 20% have to wait more than 60 days beyond their terms

Is there a solution?

There are, however, SMEs that don’t have late payment problems. 29% of those businesses claim that collecting payments by Direct Debit helps. Similarly, over two thirds of SMEs that don’t experience these problems are paid by Bacs Direct Credit.

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