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Bacs Payment Schemes (Bacs) has revealed in recent research that UK SMEs are missing out on £2.16 billion in chasing late payments.

Overall there has been a drop in late payment debt. SMEs are owed £14.2 billion compared with £30.2 billion five years ago. However, late payments are still a huge issue for many businesses and inevitably affect their ability to run smoothly.

There are 1.7 million SMEs in the UK, of them almost 640,000 said that they have had to wait beyond the agreed terms for payments. In the UK, Scotland has the highest amount of SMEs reporting late payments (46%), then Northern Ireland (39%), England (37%) and then Wales (34%).

19% of SMEs that are owed late payments say that if they were owed between £20,000 and £50,000, this would throw them into bankruptcy. 7% of those say they are already within that danger zone.

Time taken

SMEs are being kept waiting too long for many payments. About a third said that they were waiting for a month. Almost 20% even said that they had been kept waiting for more than 60 days. This interrupts cash flow and ability to cover business costs, particularly if this happens on a regular basis.

39% of companies experiencing late payments are having to spend up to four hours a week chasing them meaning that staff are often pulled away from their other responsibilities. 12% of SMEs have specifically hired someone to chase unpaid invoices, showing what a large-scale and long-term problem this is.

The effects of late payments

Having interruptions in cash flow is bad for any business, particularly if this happens on a regular basis. It adds an element of uncertainty which can then stunt growth. If you’re not sure whether you’re going to get paid this month, you’d be more hesitant to invest in the business or hire new staff.

In fact, 16% said that they were already struggling to pay their staff on time. This then affects staff morale and retention and makes it harder for businesses to attract the best workers.

28% said that company directors were forced to take a pay cut to keep going.

32% said that they had to pay their suppliers late too which then puts businesses at risk of being turned down by suppliers and having an interruption to stock levels.

25% of SMEs say they rely on bank overdrafts to make payments, which only puts a business in a worse position.

15% said that they struggled to pay business bills like rates, utilities and rent. If businesses are behind on payments, they could lose their office space or get fined for not paying business rates on time. So late payments can end up having a huge effect on businesses and in some cases be the reason they shut down.


Have you experienced late payments in your business? What effects did it have? Please share your thoughts in the comments.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

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