UK SMEs face debt burden of £23.4bn
The UK SME late payment debt has risen to a staggering £23.4bn, up £10.4bn on the £13bn owed in 2018 – according to figures released by Pay.UK, which runs the Bacs Direct Credit and Direct Debit payment services.
On top of that, the research shows that UK SMEs are now facing a total bill of £4.4 billion a year, just to collect money they are owed, with around a quarter (22%) of those waiting on funds spending more than £500 a month chasing payments.
And the number of businesses experiencing overdue payments has hit 54 per cent among small to medium size companies; that’s the highest level since 2015, when the figure stood at 55 per cent.
The average late payment debt burden has also increased to £25,000 per company, up from just over £17,000 in 2018, with SMEs reporting that, on average, a debt burden of £35,000 could jeopardise their business.
Of those SMEs impacted by delayed payments, 63% say they have a negative effect on their businesses. More than a third (35%) are forced to rely on bank overdrafts, while almost a quarter (24%) say that being paid late forces them to hold off paying their own suppliers.
Paul Horlock, Pay.UK CEO, said: “It is concerning that so many smaller businesses are struggling because of late payments in 2019, especially as there are so many ways they can now get paid. Offering customers a choice of payment or automated options can help remove barriers to make sure a bill is settled on time.”
The research also reveals that 13% of SMEs experiencing late payments struggle to pay their business bills, 12% have difficulties paying their own staff on time, and 10% have to rely on invoice financing to draw cash into their businesses.
Other headline findings from the Pay.UK Late Payments research include:
• Eight out of ten private sector late payments are owed to SMEs by other SMEs
• 78% of SMEs say they are being forced to wait a month, or longer, beyond agreed payment terms before being paid
• Some 45% of SMEs say they are being kept waiting two months or more before being paid
• 24% of business owners say they take a cut in their own salaries just to keep cash inside their businesses.