By Claire West
Hard pressed UK small to medium size enterprises (SMEs) are facing higher costs than ever in chasing late payment debt, according to new figures from Bacs Payment Schemes Limited (Bacs) the company behind Direct Debit and Direct Credit in the UK.
Research into the UK’s late payment burden shows that SMEs are racking up a collective £10.8 billion a year in their attempts to recover overdue payments — that’s an average of almost £11,500 each, or £955 a month. That compares with a total cost of £8.2 billion in July 2014.
But that’s countered by good news that the overall late payment debt appears to have peaked, and is now on its way down — Bacs’ research shows that the total amount owed to both large and small UK businesses now stands at £31.3 billion, down from £41.5 billion this time last year. The SME share of that totals £26.8 billion, down from £32.4 billion in July of last year.
Despite that, overdue payments are proving a strain for the business sector.
A huge 80 per cent of all companies which experience late payments say they are being kept waiting one month or longer beyond their agreed terms before receiving payment.
About a quarter admit that late payments are forcing them to rely on bank overdrafts (24 per cent) and a similar number say that late payments are forcing them to pay their own suppliers late (26 per cent).
When it comes to government initiatives to curb late payments, about a quarter (24 per cent) say they are aware of measures to oblige large and listed companies to publish payment practices. However, some three quarters (76 per cent) don’t feel these measures could improve the speed their companies are paid.
Mike Hutchinson from Bacs said: “Our figures show that while the late payment landscape is improving in terms of the totals owed, it is at a cost, and a very real one, with SMEs having to dip into their pockets to chase money they are owed. We urge businesses to look at automated payments like Direct Debit to reduce the time and money that companies are spending to recover payments due to them.”