Small businesses face £2 billion bill for chasing late payments
The late payment crisis in the UK is costing the UK’s small businesses more than £2 billion, according to new figures.
The cost of chasing overdue payments comes in at £2.16 billion, data from Bacs Payment Schemes Limited shows.
It is suggested that 640,000 of around 1.7 million smaller businesses wait beyond their payment terms for invoices to be paid.
The issue is particularly paramount in Scotland and Northern Ireland, while England is just behind, whereas a third of Welsh firms said they have experienced delays with payments.
Nearly four in ten firms revealed they spend up to four hours a week chasing late payments, with 12% of firms employing someone with a specific role to chase outstanding invoices.
Close to one third of firms wait at least one month past their agreed terms for payment and 20% have to wait 60 days or more.
Although the figures highlight a continuing payment problem, overall late payment debt has actually dropped during the past five years, from £30.2 billion to around £14.2 billion.
Managing cash flow effectively is essential for small businesses, as those operating on tight margins can easily find themselves in difficulty should they be faced with unexpected expenditure.
This may ultimately lead to bankruptcy or insolvency – one in five firms said that being owed £20,000 to £50,000 would be enough to force them over the edge, while 7% said they are approaching that point.
Businesses facing late payments are struggling, as 16% admitted to having difficulties paying their staff on time and 28% of directors have reduced their own salaries to ensure they have enough working capital available.
There is a knock-on effect on the supply chain too, as a third of those awaiting payments said they had paid their own suppliers late as a result.
One in four added that they needed bank overdrafts to cover essential payments while 15% revealed they struggle to pay business rates, energy bills and rent on time.
By Phil Smith