Monday 28th July, 2014

According to research by Bacs Payment Schemes Limited (Bacs) the late payment debt burden shouldered by UK businesses has reached £46.1 billion. Bacs, looked at Small to Medium Enterprises (SMEs employing up to 250 people) and large corporates (employing 250 plus people) in the UK.

The research shows that SMEs are being forced to carry the larger debt burden of £39.4 billion, while corporates are owed £6.7 billion at any one time.

Sixty per cent of UK SMEs are now experiencing late payments, with the average SME waiting for £38,186 in overdue payments. In contrast, the average corporate is owed almost a million pounds.

On top of that, UK businesses are being forced to bear additional costs of £9.16 billion a year due to late payments with around a third saying they’re spending around £500 a month as a consequence of money owed to them.

The knock-on effect of late payments means that a quarter of companies are being forced to pay their own suppliers late, with one in five saying that late payments are forcing them to rely on bank overdrafts.

In terms of the extended period that companies are kept waiting for payment, just over three quarters of companies surveyed said settlement was being delayed a minimum of a month beyond their agreed payment terms.

There is some good news, however; 71 per cent of those companies which claim not to have late payments say that robust invoicing practices were likely to reduce overdue payments.

Mike Hutchinson, from Bacs, said: "Despite the positive signs emerging about the financial state of the nation as a whole and the fact that we are thankfully moving out of recession, SMEs, which everyone agrees are the drivers of a successful economy, are being held back because of the increasing pressures of late payments."