Late Payments to SMEs leap to £26 billion

Report by BACS into common problems around payments by Bacs

Late Payments to SMEs leap to £26 billion

I posted earlier on the Blatant adverts part of the forum and thought it might be helpful to post the whole article as it was printed in the Managing Growth magazine. This magazine is actually produced in association with PC World Businesss. It is sub headed "The definitive guide for rapidly growing businesses".

I grabbed a copy a few weeks ago because this article was the first one inside the magazine and it caught my attention because of the service we offer to SME's for collection of overdue invoices - I was staggered at the numbers involved - no wonder SME's are having a hard time of it!

Very sobering reading.

This was the Spring/Summer 2009 edition issue 3

FULL ARTICLE

"Late Payments to SMEs leap to £26billion"

British small and medium sized enterprises (SMEs) are now owed a massive £25.9 billion from overdue payments, with figures jumping by almost 40 per cent over the last year, up from last year's figure of £18.6 billion. These are the latest findings from on going research into common problems around payments by BACS.

The national average of outstanding payments was up £8,000 in 2008 from 2007, reaching an alarmingly high £38,000, with the Midlands being hit particularly hard, with the averagse SME claiming overdue invoices amounting to a staggering £69,000.

SMEs are also finidng themselves owed money, with the number increasing from six out of ten, up from 51 per cent to 57 per cent in 2008, with manufacturing featuring the highest incidence of late payments, with almost two thirds of SMEs experiencing delays in payments - compared with 53 per cent in the service industry.

Adding his thoughts, Phil McCabe, spokesman for the Forum of Private Business (FPB): "Late payment and bad debt are the scourge of business owners. Often, they are major factors behind businesses being forced to close. The amount of money owed to small firms has soared over the past year as big businesses seek to create credit lines for themselves by squeezing their suppliers. In addition, despite the Government's pledge to pay its suppliers within 10 days, public organisations continue to be among the worst culprits.

"The problem has intensified as a direct result of the credit crunch and economic downturn, as credit from suppliers has increasingly dried up With the knowledge tat prompt payment can mean the difference between trading profitably and trading at all, many small businesses are now looking to the year ahead with considerable trepidation."

Bacs research into late payments also indicates the Government's Prompt Payment Code has some in-roads to make if it is going to encourage swift settlement of invoices. The latest business report shows that GB SMEs are waiting an average of 415 days beyond agreed payment terms for invocies to be settled.

The most common cause of late payment is cash flow problems, with almost a quarter (24%) saying this is the excuse they're given. There are differences across industires, though - SMEs in the service sector cited the economic downturn as the reason they were given most often (16%), where as 35 per cent of manufacturing and 30 per cent of distribution SMEs were told cash flow was the issue.

The research also found that more than three quarters of SMEs (78%) said they were looking to make their businesses more efficient in 2009, with 50 per cent planning on keeping more on top of their debtors, but only one in five intent on credit checking all new customers. In light of changing business circumstances, 28 per cent of businesses said they were planning to spend less time on email and more time talking to customers.

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