According to research conducted by Bacs Payment Schemes Limited (Bacs), small businesses in the UK are facing a bill of £6.7 billion to collect money they’re already owed in late payments.
The total figure is up from £2.6 billion in 2017 and research indicates that the cost of recovering overdue money is on average £9,000 per business
In addition, more than a third of small and medium-sized enterprises (SMEs) dealing with late payments are being made to wait longer than two months past the agreed date of payment. This figure has almost doubled since 2017 when it was when it was 19 per cent.
Paul Horlock, CEO of Pay.UK, said: “Over the last decade, the Bacs late payment research has established itself as the benchmark figure used to gauge the economic performance of SMEs.
“It reflects the overall health and well-being of UK business – when smaller companies do well, so does UK plc; as the backbone of the whole economy, the significance of SMEs cannot be overstated.”
Mr Horlock added: “Automated payments like Direct Debit are one of the most powerful weapons SMEs have in their ongoing battle to be paid on time and in full.”
As SMEs are receiving delayed settlements, this has resulted in over a quarter of business owners paying their own suppliers late, with 28 per cent of owners having to cut their own salaries in order to keep the necessary amount of funds in their business.
The survey also revealed a six per cent increase in the number of SMEs experiencing later payments overall, up from 37 per cent in 2017 to 43 per cent in 2018.
More positively, the average amount each company is owed has actually fallen, down from £22,000 in 2017 to £17,000 in 2018.
Ian Cass, Managing Director of the Forum of Private Business, which campaigns on behalf of SMEs, said: “With billions of pounds tied up in late payments, there is a knock-on effect through the whole UK economy.
“Small businesses are working to tighter margins and with late payment affecting cash-flow it can mean that these businesses can’t invest, can’t grow and in some cases it’s so serious that it can put them out of business entirely.”