New research conducted by BACS has revealed that over three quarters of UK businesses suffer from late and non-payment of invoices.
The payment giant, which processes millions of electronic business payments every day, found that an astonishing 76% of businesses are being affected by late payments of up to 6 months beyond agreed contract terms.
BACS also revealed that in companies that are suffering from late and non-payment:
- 20% of directors have been forced in to taking a pay cut
- 26% have had to increase bank overdraft use
- 23% have no choice but to pay their own suppliers late
Spokesperson for BACS, Mike Hutchinson commented:
“Late payment of commercial invoices is an ongoing issue and is forcing many businesses across the UK in to making some tough choices on how to use the cash they have available. Understandably many concentrate on keeping their own businesses solvent at the expense of paying their suppliers on time, therefore the vicious circle of late payment continues.”
The cost of late and non-payment to SME’s runs in to billions
Small and medium size businesses in the UK are currently owed a staggering £32.4 billion pounds in late payments. This figure is down from the £39.4 billion that was owed in January 2014.
However, the number of small and medium size businesses that are affected negatively by late and non-payment has only fallen by 1%, to 59% from 60% 12 months ago.
The additional costs directly related to late and non-payment are £8.2 billion annually, or £677 each month for every SME affected. Just under two thirds of this money, 63% is spent on administration chasing late and non-paying customers, costing businesses £5.2 billion every year.
Chief executive of Forum of Business, Phil Orford commented:
“Having to cope with longer payment times and the real possibility of non-payment can have a devastating impact on any business, large or small. What’s most worrying is that this late payment culture has a ripple down effect that on the whole supply chain, with businesses in every link admitting to paying their suppliers late because of the liquidity problems caused by outstanding payments”