Trading times are tough...

22 July 2014

 The Financial Times recently reported on the burden of late payment borne by small businesses The article refers to data published by Bacs Payment Schemes, the direct debit company. BPS estimates the debt burden on SMEs is £39.4bn, up from £30bn in 2013 and higher than a previous peak of £37bn in 2012.

  •  The research established that 60 % of SMEs are experiencing late payments, with the average company waiting for £38,186 in overdue payments.
  • 72% of companies in the manufacturing sector were affected by overdue payments, followed by those in services (63%) and the transport, retail and distribution sector (48%).
  • Businesses are incurring additional costs of £9.16bn a year because of late payments, with almost a third saying they were spending around £500 a month as a consequence of money owed to them. This figure could be as high as £10,000 a month as a result of the various costs associated with bad debts, including overdraft fees and administrative costs.
  • One in four companies is spending more than 10 hours a week chasing late payments.
  • The knock-on effect of late payments meant that a quarter of companies were being forced to pay their own suppliers late, with one in five saying late payments are forcing them to rely on bank overdrafts.

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