Cost of collecting late payments rockets

The UK’s smallest businesses are facing a bill of £6.7 billion, up from £2.6 billion in 2017 – just to collect money they’re already owed, according to research by Bacs Payment Schemes Limited (Bacs), part of leading UK retail payments authority Pay.UK.

This latest research, from the people behind Direct Debit and Bacs Direct Credit, shows that the cost of recovering overdue money is now at an average of £9,000 for each business. On top of that, more than a third of small to medium sized enterprises (SMEs) coping with late payments are waiting two months beyond agreed terms to be paid. That’s double the number of businesses who said the same in 2017 (19 per cent).

Paul Horlock, CEO of Pay.UK, said:

“Over the last decade, the Bacs Late Payment research has established itself as the benchmark figure used to gauge the economic performance of SMEs. It reflects the overall health and well-being of UK business – when smaller companies do well, so does UK plc; as the backbone of the whole economy, the significance of SMEs cannot be overstated. And automated payments like Direct Debit are one of the most powerful weapons SMEs have in their ongoing battle to be paid on time and in full.”

The delay in receiving settlement is having wide-reaching effects, with over a quarter of SME business owners who do experience late payments forced to pay their own suppliers late; 28 per cent also say they have had to cut their own salaries in order to keep cash inside their businesses.

In addition, the survey revealed a six per cent increase in the number of SMEs experiencing late payments  overall,  up from 37 per cent in 2017 to 43 per cent in 2018; that makes for a total late payments bill of £13 billion across the UK, close to 2017’s £14 billion. More positively, the average amount each company is owed has actually fallen, down from £22,000 in 2017 to £17,000 in 2018.