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REVEALED: Cash flow consequences of £14.2bn late payment problem


UK small businesses are still experiencing devastating cash flow consequences as a direct result of overdue invoices, despite a drop in overall late payment debt.

New research revealed that UK small to medium size enterprises (SMEs) are owed £14.2 billion in late payments, half of the £30.2 billion owed five years ago.

But, this significant decline has done little to ease the cash flow struggles of SMEs, with many relying on overdrafts, paying staff late and fearing bankruptcy whilst waiting for payment from their customers, according to the findings from Bacs Payment Schemes Limited (Bacs).

Cash flow crisis

Almost two in five (38%) SMEs said that payments are often prolonged way beyond agreed terms, with almost a third of companies facing delays of at least a month and 20% having to wait more than 60 days before being paid.

As a result, businesses are facing a total bill of £2.16 billion to chase overdue payments.

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This is putting significant strain on cash flows, with a quarter relying on bank overdrafts to make essential payments, 16% struggling to pay their staff on time and 28% of company directors reducing their own salaries to keep essential working capital inside their businesses.

And, the negative impacts of late payment don’t stop at the cash flow implications.

Chasing late payment can consume a great deal of a small business’s time and resource, with 39% of companies spending up to four hours a week chasing late payers and 12% of SMEs employing someone specifically to pursue outstanding invoices. 

The knock-on effect

Perhaps not surprisingly, the late payment damage doesn’t stop at one business.

As a direct result of late payment, 32% are forced to pay their own suppliers late, while 15% find it difficult to pay business bills like energy, rates and rent when they’re due, passing the cash flow implications further down the supply chain, potentially harming multiple businesses along the way.

It is clear that, while in terms of overall late payment debt the problem seems to be improving, the cash flow consequences of the issue are still hobbling the performance of small businesses and much more needs to be done to protect companies from poor payment practices.

If late payment is damaging your business’s cash flow, as a leading debt recovery agency and provider of outsourced credit control we could help. For more information on how we can assist you please call 0800 9774848 or email collections@hiltonbaird.co.uk detailing your requirements.


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