Late payments costing UK SMEs £23.4bn
22 Nov 2019
UK small to medium sized enterprises (SMEs) have seen debt due to late payments almost double in the past year
22 Nov 2019
Also, three quarters of SMEs are waiting a month or longer beyond agreed terms, according to research by Pay.UK, which runs the Bacs direct credit and direct debit payment services
Its figures, based on a poll of 355 companies, show UK SME late payment debt has risen to £23.4bn, up £10.4bn on the £13bn owed in 2018. The number of SMEs experiencing overdue payments has hit 54%, marking the highest level since 2015, when the figure stood at 55%.
Some three quarters (78%) of SMEs say they are being forced to wait a month, or longer, beyond agreed payment terms before being paid, while 45% are being kept waiting two months or more. The research also shows that UK SMEs are now facing a total bill of £4.4bn a year, just to collect money they are owed, with around a quarter (22%) of those waiting on funds spending more than £500 a month chasing payments.
The average late payment debt burden has increased to £25,000 per company, up from just over £17,000 in 2018, with SMEs reporting that, on average, a debt burden of £35,000 could jeopardise their business.
Of those SMEs impacted by delayed payments, 63% say they have a negative effect on their businesses. A third (35%) are forced to rely on bank overdrafts, while almost a quarter (24%) say that being paid late forces them to hold off paying their own suppliers.
Paul Horlock, Pay.UK CEO, said: ‘It is concerning that so many smaller businesses are struggling because of late payments in 2019, especially as there are so many ways they can now get paid. Offering customers a choice of payment or automated options can help remove barriers to make sure a bill is settled on time.’
The research also revealed that 13% of SMEs experiencing late payments struggle to pay their business bills, 12% have difficulties paying their own staff on time, and 10% rely on invoice financing to draw cash into their businesses.