There are very few things more annoying than being left waiting. Whether it’s your friends turning up late to the pub, sitting at home all day waiting for a delivery or being left in a restaurant twiddling your thumbs, watching the minutes tick past as you wonder if your date is just late or not showing up at all.
Well it turns out British SMEs are experiencing similar problems to many members of the Elite Business team. According to new research from Bacs Payment Schemes Limited (Bacs), a staggering 60% of SMEs are having to deal with late payments, with the average firm waiting on £38,000 in due invoices. More alarmingly, one in four SMEs say that if this figure was to increase to £50,000, it would be enough to send them into bankruptcy.
With £39.4bn of the nation’s £46.1bn late payment debt burden being owed to SMEs, it’s causing extra costs to be incurred across UK firms to the tune of over £9bn. These costs come not only in the form of overdraft fees but also administrative costs, with one in four firms devoting ten hours a week to chasing late payments. Bacs revealed that companies operating out of Scotland and Northern Ireland encounter this problem more often, with two-thirds of SMEs claiming they have been left waiting for funds. And getting sector-specific for a second, its manufacturing firms that are most likely to be impacted, with 71% stating they had faced financial delays and 63% of service businesses reported to have suffered the same issues.
“Not paying on time and lengthy terms can have a seriously detrimental impact on small firms,” says Mike Cherry, national policy chairman of the Federation of Small Businesses (FSB). “The FSB wants the government to tackle the issue head-on in its Small Business Bill. Small firms simply can’t be expected to lend interest free to larger companies, which late payments and extended payment terms force them to do. The EU Late Payment Directive is very clear that if payment terms exceed 60 days, they must explain why. It’s time for big companies to take their responsibility to pay on time seriously.”
With the economy in recovery mode, it’s unfair on SMEs that sit further down the payment chain to have their pursestrings stretched in this way. Let’s hope the Small Business Bill solves what is arguably the biggest cause of financial harm to our hard-working small businesses.