More than three quarters (78 per cent) of small and medium-sized enterprises (SMEs) are having to wait one month or more beyond agreed payment terms before they are paid, a new study reveals.
The worrying research, which was carried out by Bacs Payment Schemes Limited (Bacs), found that more than a third (34 per cent) of SME owners and decision-makers were being forced to rely on their overdrafts in order to make ends meet.
It also found that 11 per cent of SMEs had employed someone externally to help them resolve their late payment woes, with almost half (43 per cent) of businesses spending some £4.4 billion in admin and other costs in their efforts to chase unpaid invoices.
Nevertheless, as separate research from the Federation of Small Businesses (FSB) reveals, falling victim to the so-called ‘late payments crisis’ can have dire consequences – which is why taking early action is essential.
According to the FSB’s research, late payments alone cause approximately 50,000 company failures every single year, costing the UK economy a shocking £2.4 billion.
Ian Cass, Managing Director of the Forum of Private Business, a group which campaigns on behalf of SMEs, said: “With billions of pounds tied up in late payments, there is a knock-on effect through the whole UK economy.
“Small businesses are working to tighter margins and with late payments 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.”
With this in mind, it is important for businesses to act ASAP if they find themselves struggling to recover unpaid invoices, it has been warned.