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Chasing Overdue Payments ‘Costing Smaller Business £2bn a Year’

Written by: Keith Tully

Reviewed: Friday 14th July, 2017

The process of chasing after overdue payments from clients is costing smaller businesses around the UK a collective total of around £2 billion per year.

That’s according to the company behind direct debits Bacs Payment Schemes Limited (Bacs), which says that there are roughly 640,000 British SMEs which find themselves waiting for overdue payments.

For many of these companies, the process of chasing after payments that should already have been made costs both time and money.

Bacs’ figures suggest that 39 per cent of SMEs spend up to four hours per week chasing late payments and 12 per cent employ a member of staff specifically to pursue unpaid and outstanding invoices.

Worryingly, around one in five of the businesses who are affected by overdue payment issues fear that being owed anywhere between £20,000 and £50,000 for an extended period of time might be enough to send their operations into a position of insolvency.

Roughly seven per cent of the firms affected by late payment problems told Bacs that they are already in a position of potentially facing bankruptcy as a result of seeing their invoices go unpaid.

These kinds of situations can have major knock on effects, with late payment issues leaving some companies unable to pay their staff and directors having to reduce their own salaries to help balance the books.

Other consequences of late payments picked up on by Bacs via its research include a reliance among SMEs on overdraft facilities to make essential payments and situations in which SMEs find themselves unable to pay their own suppliers.

Although the UK’s SMEs are currently estimated to be owed in the region of £14.2 billion by their customers in relation to unpaid overdrafts, this figure is down from almost £30.2 billion five years ago, according to Bacs.

“Falling late payment totals is welcome news for small to medium size businesses and for the wider economy,” commented Mike Hutchinson from Bacs, which functions as a not for profit operation.

“We’d advise all businesses to investigate if automated payments can help them control their cashflow more effectively,” he added.

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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