Starting a new business? Get 40% off our accountancy services for 3 months! 😀

x

One of the Government’s pre-election promises to small businesses was measures to tackle late payments. But according to new figures from Bacs Payment Schemes Limited (Bacs), the company behind Direct Debit and Direct Credit in the UK, SMEs are spending more than ever on chasing late payments.

Late Payments Cost Nearly £1000 per Month

The research by Bacs revealed that SMEs are spending a collective £10.8 billion a year attempting to recover overdue payments, up from £8.2 billion in July 2014. This means that each business is spending, on average, around £955 a month on late payment recovery.

However, overall late payment debt appears to have peaked, says Bacs, and it is now on its way down; the total amount owed to both large and small UK businesses is now only £31.3 billion, down significantly from £41.5 billion in July last year. £26.8 billion of that debt is owed to SMEs, down from £32.4 billion last July.

But overdue payments are still proving a problem for businesses, and 80% of all companies experiencing tardy payments say these payments are late by a month or more, while 24% admitted this leads to a reliance on bank overdrafts and 26% admitted it causes them to become late payers themselves.

Government Measures

In January 2015, Michael Fallon, who was Business and Enterprise Minister at the time, announced he was ‘going to war’ on late payers, saying: “Cash flow is the lifeblood of small companies. Poor cash flow is how small businesses go under.”

Mr. Fallon had previously issued invitations to all businesses in the FTSE 350 to sign up to the voluntary prompt Payment Code, run by the Chartered Institute of Credit Management on behalf of the Department for Business. Code signatories undertake to

The Minister gave the remaining unsigned companies one month to either sign up to the new rules on paying their suppliers promptly or risk being “named and shamed”, and in the March budget, George Osborne also promised to extend the voluntary prompt payment code, to which 1,700 companies had already agreed.

The EU late payment directive already stipulates that public authorities and private companies must pay their suppliers within 30 and 60 days respectively, or explain why.

Low Impact Initiatives

But only 24% of the companies that Bacs surveyed said they were aware of measures that oblige large and listed companies to publish payment practices, and 76% don’t feel these measures will improve the speed with which they are paid anyway.

Mike Hutchinson from Bacs said: “Our figures show that while the late payment landscape is improving in terms of the totals owed, it is at a cost, and a very real one, with SMEs having to dip into their pockets to chase money they are owed. We urge businesses to look at automated payments like Direct Debit to reduce the time and money that companies are spending to recover payments due to them.”

 

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

More posts by this author
guest
0 Comments
Inline Feedbacks
View all comments

Read more posts...

Get Ready for Small Business Saturday UK 2022

Small Business Saturday started in the US in 2010, on the first Saturday following Thanksgiving. It aims to encourage shoppers to consider…

Read More

Architects and Tax

Architecture is a highly diverse sector when it comes to tax. It’s partly down to the type of businesses that carry out…

Read More

June 2022 Client of the Month: Manea Kella

This month we spoke to Adrian Manea, architect and director at Manea Kella, a London based RIBA Chartered architecture and interior design…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.

Bookkeeping

You only need this service if you want us to complete the bookkeeping on your behalf.

Would you prefer to complete your own bookkeeping?

Yes
No

Call us on 020 3355 4047 if you’re not sure.