Late Payments to SMEs Leap 40 Per Cent

As the credit crunch continues, small and medium sized enterprises (SMEs) are now owed a massive £25.9 billion in overdue payments. The figure has rocketed by almost 40 per cent over the last year - up from £18.6 billion.

Almost six out of 10 SMEs across Great Britain are now finding themselves owed money, with firms in manufacturing seeing the highest incidence of late payments, with almost two thirds (65%) of SMEs in this sector experiencing delays in the payment of invoices – this compares with 53% of those in the service industry.

The research conducted by Bacs shows that SMEs are waiting an average of 41.5 days beyond agreed payment terms for invoices to be settled. The most common cause of late payment is cash flow problems.

Michael Chambers, Managing Director of Bacs, said:

“This research demonstrates the pain being felt by many small and medium sized British businesses during these challenging economic times, and late payments could well be a major factor in the success or failure of these companies in the year ahead - SMEs are currently disappearing at a rate of 86 every day.”

Phil McCabe, spokesman for the Forum of Private Business (FPB) commented:

“Late payment and bad debt are the scourge of business owners. Often, they are major factors behind businesses being forced to close. The amount of money owed to small firms has soared over the past year as big businesses seek to create credit lines for themselves by squeezing their suppliers. In addition, despite the Government’s pledge to pay its suppliers within 10 days, public organisations continue to be among the worst culprits.” 

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