Annual research by Bacs has shown that small businesses in the UK are facing a £6.7bn bill to collect late payments.
This narrows down to a hefty £9,000 worth of costs per business – money that will be used to recover overdue payments. It’s a figure that’s more than doubled since 2017.
Amongst its latest research, Bacs also learned that…
- The number of SME’s receiving late payments has gone up by 6% over the past year
- One-third of small to medium-sized businesses receive payments more than two months after the agreed date
- 43% of SMEs spend roughly £4.4 billion in admin costs alone on chasing late payments
The delay in reaching settlement has set a serious train of events in place for businesses, with over a quarter of SME’s forced to pay their own suppliers late as a result. 28% have had to shave their own salaries to keep their business afloat, whilst an even larger number are saying they’re having to dip into their overdrafts to cope.
What are the subsequent impacts of late payments?
Ian Cass, managing director of the Forum of Private Businesses, suggests that the issue of late payments is a national one.
“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 payment affecting cashflow 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.”
Paul Horlock, CEO of Pay.UK, the UK’s leading retail payments authority, suggests that the answer lies in automated payments like Direct Debits, which give the service provider control over payment collections.
The late payment rate for Direct Debits is below 1%, even less if you use a Direct Debit management company to handle collections for you. With transactions coming out at set frequencies, the problem of leaving suppliers to pay manually is eradicated.
Companies with a handle on late payments also cite better invoicing as a solution to this growing problem. It’s not uncommon for organisations to leave crucial information like the billing address or bank details off an invoice.
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DFC is a leading Revenue Solutions Management Solutions provider, handling Direct Debits for thousands of happy customers across the UK.