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Costs of Collecting Late Payments Rising Sharply Among SMEs

Written by: Keith Tully

Published: 12th December 2018

SMESmall and medium-sized enterprises (SMEs) across the UK are paying increasingly large sums of money to collect amounts owed to them by their clients and customers.

That’s according to a new set of figures on the subject which suggest that the process of collecting money owed by customers now costs SMEs an average of close to £9,000 a year.

More than a third of these companies are said to be routinely waiting more than two months after their invoices are passed due before they actually get paid.

The retail payments authority Pay UK has produced the latest numbers and said that SMEs are increasingly having to wait longer for customer payments and spend more money in order to bring in what cash they’re owed.

In fact, the organisation has said that the money spent by SMEs to recover payments owed to them increased from £2.6 billion in 2017 to around £6.7 billion this year.

Meanwhile, the rise in the number of companies who’ve been obliged to wait two months beyond their invoice due dates for payments this year has almost doubled.

Pay UK’s research also suggests that around a quarter of SMEs who’ve received late payments from their customers have been obliged as a result to pay their own suppliers late.

The overall number of companies to have experienced problems with late payments is understood to have risen from 37 per cent to 43 per cent over the course of 2018.

For a large number of businesses, issues with late payments have led directly to a reliance of one or more form of credit.

Around 40 per cent of the SME bosses polled by UK Pay said that they view big companies as being the worst offenders when it comes to late payments.

Ian Cass, managing director of the Forum of Private Business, a small business campaign group, has outlined some of the consequences for SMEs of late payments and suggested the issue has a “knock on effect throughout the whole UK economy”.

“Small businesses are working to tighter margins and with late payment affecting cash-flow it can mean that these businesses can’t invest, can’t grow and in some cases it’s so serious that it can put them out of business entirely,” he said.

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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