SMEs owed 40 billion in late payments

Bacs Payment Schemes surveyed 350 firms and found that UK firms are owed £46.1 billion in total. A staggering figure of £39.4 billion is owed to small and medium sized businesses, with larger corporates only being owed £6.7 billion.

60% of SMEs are experiencing late payments, each waiting on average for £38,186 in late payments. A quarter of SMEs believe that they will go out of business if the total amount owed to them reaches £50,000 and a similar figure have paid their own suppliers late as a result of delays in receiving payments.

The research also reveals that significant numbers of SMEs are relying on bank overdrafts as a result of late payments and that overall SMEs are incurring additional costs of £9.16 billion per year in overdraft fees and admin charges.

The sectors most badly affected are manufacturing, services and transport, retail and distribution.

The government is due to legislate to force companies to publish information about their payment terms in an effort to shame larger companies into paying on time. It remains to be seen whether this will have any noticeable impact upon the debt burden currently being shouldered by the SMEs. If the figure owed to them continues to grow it will inevitably lead to some SMEs facing insolvency. We would recommend that any business in this situation seeks urgent insolvency advice, since the implementation of an appropriate rescue plan can provide a lifeline for an otherwise viable business which needs time to pay its debts.