Small businesses dealing with late payments often have to delay settling invoices with their suppliers as a result. According to freshly published research by Bacs Payment Schemes, around a quarter of UK SMEs are struggling with this issue – a problem estimated to cost British firms more than £9 billion in debt every year.
The findings of this study came from a survey of 350 small businesses. Of these, at least 60% reported having ongoing issues with late payments. Many SMEs are waiting on up to £40,000 in unpaid invoices and one in four companies admitted bankruptcy was a likely outcome if this increased to £50,000.
Further statistics revealed that around a third of companies spend in the region of £500 per month to cover outstanding payments. For some businesses, the monthly amount rose as high as £10,000.
Late payments are costing SMEs time and money
Overdraft fees, extra admin and wasted time spent chasing up missing payments all result in huge costs for businesses. Shockingly, a quarter of SME owners and leaders are spending an average of 10 hours each week chasing invoices.
Mike Hutchinson, Director of Scheme Support and Development at Bacs, said:“Despite the positive signs emerging about the financial state as a whole and the fact that we are thankfully moving out of the recession,SMEs, which everyone agrees are the drivers of a successful economy, are being held back because of the increasing pressures of late payments.”
The worst affected industry is manufacturing, with 72% of SMEs having late payment problems. The services sector had the second highest percentage with 63%.