SMEs in North damaged by late payment of bills

 

Businesses in the North of England were owed £4.6bn in late payments in 2011, according to Bacs, the organisation behind Direct Debit and Bacs Direct Credit.

As a region, the picture has improved slightly for SMEs as in 2010 the figure was £6.2bn with the average owed to each firm also down from £25,000 to £18,000 in 2011.

Currently 256,000 businesses in the North East experience late payments and nearly one in 10 admit to being very worried about waiting to get paid, to the extent they are constantly checking for it.

And firms in the region are waiting on average almost twice as long to get paid than the original terms agreed with their customers. Around 55% of businesses in the North expect to be paid within 30 days, but on average have to wait another 24 days after that – making it two months before being paid.

The most frequent excuse businesses in the North hear is that the hold-up is due to internal systems – 63% say they are being told their invoice is waiting for authorisation with 52% hearing that the bill is being processed by accounts. But the old chestnut of ‘the cheques in the post’ is still among the top excuses with 56% of businesses giving this reason.

Mike Hutchinson, head of marketing at Bacs, said the issue of late payments is damaging to businesses that are relying on good cash flow to keep going through the fragile post-recession recovery period.

He says: “The problem of late payment is ever-present for SMEs in the North and nationally the value of late payments has reached a new high of £33.6bn.

“At a time when firms in the North need to plan ahead for growth to ensure a strong cash flow, they are hanging on for payments which could have a serious impact on their business.

“We urge SMEs working in the North to look at what payments can be automated to help them assert more control over their cash flow, and hopefully alleviate some of that stress on the business and its owner.”

Philip King, chief executive of the Institute of Credit Management, added: “This latest research reinforces how important it is that all companies, and more particularly SMEs, agree on payment terms upfront and work to cultivate a prompt payment culture in all of their business dealings.

“More than 1,000 companies have already shown their commitment to a more positive payment culture by signing up to the Prompt Payment Code, but these figures demonstrate that more companies need to change their payment practices in order to combat the detrimental effect of late payment on small business.”

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