Late Payments to UK SMEs Rise 40% to £26bn
Bacs Payment Schemes Limited (Bacs) has reported that UK small and medium sized enterprises (SMEs) are now owed £25.9bn after overdue payments increased by almost 40% over the past year, up sharply from £18.6bn.
While the national average of outstanding payments was high in 2008 at £38,000, up £8,000 on 2007 figures – it’s the Midlands that has been hardest hit, with the average SME here claiming overdue invoices amounting to £69,000.
The number of SMEs finding themselves owed money across the UK also increased to almost six out of every 10, up from 51% in 2007 to 57% in 2008. The manufacturing industry sees the highest incidence of late payments, with almost two-thirds (65%) of SMEs in this sector experiencing a delay in invoices being paid, compared with 53% of those in the service industry.
Bacs research into late payments also indicates the government’s Prompt Payment Code has some in-roads to make if it is going to encourage swift settlement of invoices. This latest business omnibus shows that UK SMEs are waiting an average of 41.5 days beyond agreed payment terms for invoices to be settled.?The most common cause of late payment is cash flow problems, with almost a quarter (24%) saying this is the excuse they’re given. There are differences across industries, though – SMEs in the service sector cited the economic downturn as the reason they were given most often (16%), where as 35% of manufacturing and 30% of distribution SMEs were told cash flow was the issue.