Written by: Keith Tully
Date: 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.
18th January 2018 There was a sharp rise in the number of British companies facing serious financial problems during the latter months of last year as compared with the same period in 2016.
18th January 2018 A majority of British businesses would prefer to see the UK’s regulatory infrastructure align with that of the EU after the Brexit process has been undertaken.
11th January 2018 An extensive audit of Apple Europe’s UK operations by HMRC has resulted in the consumer technology giant paying an extra £137 million to the British tax authorities.
10th January 2018 The total number of retail businesses which entered into administration over the course of 2017 was 28 per cent higher than during the previous 12 months.
8th January 2018 Tens of thousands of companies across the UK could soon find themselves having to pay VAT amounts upfront to HMRC on a routine basis.
Every day we help companies just like yours turn things around against seemingly impossible odds, regardless of your situation we can help. Find your nearest office today.