Late payments

UK SMEs are in danger of failing due to a mounting tide of late payments, according to research by Bacs Payment Schemes.

The findings reveal that the average amount owed to UK SMEs is £36,000. Yet over a third (35%) say late payment debts of up to just £20,000 would be enough to put them out of business.

Over one million SMEs – with a total collective debt of almost £36.4bn – are now under serious threat, the survey discovered. The problem is deemed to be particularly prevalent in the south of the country, where the average amount owed in overdue payments to the region’s smaller companies is £53,000. Almost half (49%) of those surveyed said that it would take up to £50,000 - to put them out of business.

Midlands SMEs face similar problems and the while the average outstanding debt is significantly lower, at £22,000, some 37% of companies said unpaid invoices of up to £20,000 could cause their business to fail. In the North, where the average debt is £27,000, more than a quarter (27%) said the same.

The research found that around six out of ten UK SMEs (59%) experience late payments. In the south, the proportion of smaller businesses facing overdue settlement echoed the national average, ahead of northern companies at 55% and their Midlands counterparts at 63%.

The average UK SME experiencing late payment now has to wait 43.4 days beyond payment terms for their invoices to be paid – with northern businesses forced to endure the longest wait, with an average delay of 46.8 days before bills are settled.

One consequence of the late payments culture is that hard-pressed businesses are being forced to invest an average of almost 14 days every year – or almost three working weeks - in chasing overdue bills.

Nationwide, the majority – 37% - say the worst offenders are large companies, although a quarter (25%) of companies surveyed claimed fellow SMEs were also guilty of paying late. Government and not-for -profits were at the bottom of the offenders’ list, with just six per cent of SMEs experiencing late payments at their hands.

The most common excuse SMEs hear is that the delay is down to cash flow problems within the company being invoiced.