Reports have shown that late payment debt has declined over the last five years from SMEs being owed £30.2 billion decreasing to £14.2 billion. However, according to a study from Bacs Payment Schemes Limited, small businesses in the UK are still facing a bill of over £2 billion having to chase these overdue payments.
Out of 1.7 million UK SMEs, almost 640,000 of businesses say that they have to wait beyond their agreed payment terms, and thirty nine percent of businesses are spending up to four hours a week chasing these debts. Twelve percent of SME businesses even employ a specific person to pursue outstanding invoices.
Almost one in five SMEs affected by overdue settlements say that being owed between £20,000 to £50,000 would be enough to drive them into bankruptcy. Of those facing late payments, the issues that arise include: paying staff late, having to reduce salaries and paying suppliers late. Many rely on overdrafts to make essential payments.
The study shows that the companies having the least amount of problems are those who have set up payments using BACS or direct debit.
This news also coincides with the latest data from the Chartered Institute of Credit Management, who have announced that they have registered their 2,000th signatory to the Promp Payment Code (PPC). They have said that the Code is having a ‘demonstrable impact on improving the payment practices of larger firms.’
With almost three-quarters of the FTSE100 now signed up to the Code, Philip King, Chief Executive of the CICM, says that the initiative continues to gain momentum and credibility: “It is important that businesses large and small recognise the Code as a tool that can help improve payment practices and the understanding of the supply chain.”
It also identifies a recent announcement from 32 of the biggest suppliers to the Government who have voluntarily committed to pay 95% of invoices within 60 days – and to work towards adopting 30 days as the norm.
This announcement highlights the success of the Code and its principal objective of changing the culture of late payment, and points to a promising future of managing business debt.
By running reports through CoCredo and using our monitoring service you can limit the chances of bad debt.
However, if you are concerned about any of your suppliers not paying on time please contact us. We work with a number of leading debt recovery firms to help relieve the burden of bad debt on your behalf. Contact us on 01494 790 600 to discuss this further.