Late payments affecting over half businesses in the UK
Late payments could be causing a ripple effect on over half the businesses in the UK, according to new figures. The total cost of delayed settlement could be costing them up to £2bn per year.
Bridging the payment gap
The research, released by Bibby Financial Services, shows that 2.38 million (53%) of UK business owners or managers are stalling payments to other parties in a bid to bridge the late payment gap. With 12 per cent of these businesses spending three days or more per month to recover payments, the potential cost to the economy is huge.
The figures highlight this ripple effect and the number of businesses that can be hit by the late payment chain. Indeed, for 1.35 million (30%t) UK businesses, just one late customer payment can have a large impact on payments to all subsequent suppliers. And, worryingly, for half a million (12%) businesses one late payment can affect everyone they do business with.
Furthermore, the research reveals 52% of UK business owners are spending more time this year chasing late payments than last year, costing vital time and money at a crucial stage for the UK economy. This is supported by figures from Bacs released earlier this year which showed SMEs were owed £25.9 billion after late payments increased by 40 per cent on the previous year’s amount of £18.6 billion.
Late payment is shown to have far reaching consequences. For more than two in five businesses (43 per cent) the single main outcome of late payment this year is an inability to pay suppliers. For a third (34 %) it means a recruitment freeze and for 30 per cent it means a staff salary freeze.
Costly lengths to make ends meet
The research also reveals the other and sometimes costly lengths to which businesses are going to bridge the growing problem of late payment:
- One in five (18%) rely on a bank overdraft, whether it be business or personal
- One in 10 (9%) resort to asking family members for a loan
- Nearly one in 10 (8%) go to their friends
- Almost five per cent will use personal savings
- Three per cent will rely on a personal credit card
When looking at how companies are currently managing late payment, 12% of business owners and their staff spend three days or more each month chasing up late payments. A third spend just half a day per month, a third have a credit control department, and one in 10 use a factoring company to manage this process.
Further Resources
- Tacking late payment problems during the downturn
- How to manage debts and increase cashflow
- Get an online invoice finance quote
Posted July 3, 2009
