SME late payment costs swell to £6.7bn

The costs SMEs face in collecting late payments have rocketed, up from £2.6bn a year ago to £6.7bn currently, according to research by Bacs Payment Schemes (Bacs), part of UK retail payments authority Pay.UK

The cost of recovering overdue money is now at an average of £9,000 for each business. In addition, more than a third of SMEs coping with late payments are waiting two months beyond agreed terms to be paid, double the number in 2017 (19%).

More than three quarters (78%) of SMEs owed money are being forced to wait one month or more beyond their agreed terms before they are paid.

Large companies are the worst late paying offenders according to 40% of SMEs owed money, while 51% of SMEs take large company payment practices into account before trading with them.

 BACS says the delay in receiving settlement is having wide-reaching effects, with over a quarter of SME business owners who experience late payments forced to pay their own suppliers late; 28% also say they have had to cut their own salaries in order to keep cash inside their businesses, and a third (34%) say they have to rely on overdrafts to help them meet their monthly obligations.

In addition, the survey revealed a 6% increase in the number of SMEs experiencing late payments overall, up from 37% in 2017 to 43% in 2018, making for a total late payments bill of £13bn.

This is slightly below 2017’s £14bn, and the average amount each company is owed has fallen, down from £22,000 in 2017 to £17,000 in 2018.

Ian Cass, managing director of the Forum of Private Business, which campaigns on behalf of SMEs, said: ‘With billions of pounds tied up in late payments, there is a knock-on effect through the whole UK economy. Small businesses are working to tighter margins and with late payment affecting cash-flow it can mean that these businesses can’t invest, can’t grow and in some cases it’s so serious that it can put them out of business entirely.’

Report by Pat Sweet

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