July 12 2014
Research published by BACS, the payment service company shows how the burden of late payment of invoices is falling disproportionately on small and medium sized businesses (SMEs).
The research compared SMEs (those employing up to 250 people) and large companies (with 250 or more employees) in the UK. SMEs carry a debt burden of £39 billion, while large companies carry a much smaller burden of £6.7 billion.
BACS also found that 60% of SMEs are experiencing late payment, with the average waiting for £38,000 in overdue payments. One in four SMEs admit that if the amount they are owed grew to £50,000 it would be enough to send them into bankruptcy.
The costs of these late payments to business are £9.16 billion a year. Around a third of businesses say they’re spending between £500 and £10,000 a month on overdraft fees and admin costs associated with overdue invoices. One in four companies were found to be spending more than 10 hours a week chasing late payments.
The knock-on effect of late payments is that a quarter (25 per cent) of companies are being forced to pay their own suppliers late, with one in five (21 per cent) saying that late payments are forcing them to rely on bank overdrafts.
Samantha White, CEO of My Credit Controllers said:
"This research underlines the importance of good credit control and robust invoicing processes. The first step is to get your invoices right, but if you're wasting hours each week chasing late payers, why not look at outsourced credit control for full debtor book management or alternatively hand over those late invoices to a debt recovery service? New legislation means that you can recover the costs of our services from late payers and charge interest too."
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