More than three quarters of businesses suffer from late payments, according to research by Bacs.
The payment company, which is responsible for clearing millions of electronic transactions each day, reveals that 76% of British businesses are affected by late payments of more than 1 month beyond the agreed contract terms.
In companies suffering from late payments:
- 20% of directors have taken pay cuts
- 26% use their overdrafts
- 23% are paying their suppliers late.
Mike Hutchinson, spokesperson for Bacs, said:
“The ongoing issue of late payments means that businesses across the UK are facing some tough choices about how to use the cash available to them. They are concentrating on keeping their own businesses afloat rather than paying suppliers, and so the vicious circle continues.”
Late Payment Costing SMEs Billions
The figures reveal that SMEs are currently owed £32.4 billion in late payments, down from £39.4 billion in January 2014.
However, the number of SMEs that are negatively affected by late payments has only fallen slightly – from 60% in January 2014 to 59% in 2015.
SMEs also face around £8.2 billion in additional annual costs that are directly related to late payments. This equates to £677 a month for each firm. Almost two thirds of this money (63%) is spent on administration, which costs businesses £5.2billion each year.
Phil Orford, chief executive of the Forum of Private Business, said:
“Being paid late or having to deal with longer payment times can severely hamper any business, large or small. Alarmingly, this culture of late payment has a ripple effect down the whole supply chain with many small firms admitting to paying their suppliers late due to business liquidity issues created by outstanding payments.”