Research reveals the £36.4bn cost of late payment debt to SMEs

In the North, the average amount owned to SMEs is slightly lower than the national figure, at £27,000. Meanwhile, 27 per cent of the region’s smaller companies said that debts of up to £20,000 would put them out of business.

Nationally, late payment debt to SMEs is now almost £36.4bn, up from £35.3bn at the end of 2011, according to the survey by Bacs Payment Schemes, the company behind Direct Debit and Bacs Direct Credit.

And, while the average UK SME experiencing late payment now has to wait 43.4 days beyond payment terms for their invoices to be paid, in the North of the country, businesses are waiting even longer with a reported average of 46.8 days.

The research, carried out using information from 478 SMEs in UK, during July, showed that around six out of ten SMEs experience late payments. And businesses in the North are spending an average of 2.2 hours each week – or almost three working weeks every year – chasing late payments.

Even based on minimum wage rates, that means overdue invoices will cost Northern SMEs just over £200m in 2012 in time alone, said Bacs Payment Schemes.

Nationwide, 37 per cent of SMEs say the worst offenders are large companies, although 25 per cent of companies surveyed claimed fellow smaller businesses were also guilty of paying late.

Government and not for profits were right at the bottom of the offenders’ list, with just six per cent of SMEs experiencing late payments at their hands.

The most common excuse SMEs hear is that the delay is down to cashflow problems within the company being invoiced, with 47 per cent saying this is the reason they are given.

Mike Hutchinson from Bacs said: “The research shows that the late payments culture in the UK is creating serious problems for the country’s SMEs, with many reporting their business could ultimately close.

“And delayed invoice settlement is also causing strain for SME owners personally, which has further potential negative repercussions for businesses.

“We urge SMEs to look at taking control over their cashflow wherever they can by automating payments where possible to save valuable time and administration costs, and hopefully alleviate a little of the pressure on the business and its owner.”