London and the South East of England top the late payments league, according to the latest study from Bacs.
Nearly 400,000 UK enterprises suffer because of delayed payments and the average owed to one company at any one time is £27,000. Although more firms in the south of England are owed money, they do not have as much debt outstanding as companies in the Midlands who are owed up to £38,000.
Large corporations are responsible for the lion’s share of the debt. They owe £24 billion to British SMEs and in some cases invoice settlement is up to 52 days overdue. The public sector and not-for-profit organisations on the other hand improved their payment times in the last half of 2010.
33% of SMEs say big companies are behind overdue bill payments and those operating in the manufacturing sector are the most likely victims. 53% of UK SMEs have suffered late payment, up 8 percentage points from June last year. When they do eventually receive settlement it’s an average 39 days over the agreed payment terms and this rise rises to nearly 50 days overdue in the distribution sector.
The burden of chasing overdue bills is having an adverse impact on smaller businesses. They now need to devote half a day every week to chase payment, equating to over 158 million man hours the British economy loses just to pursuing overdue debts.
At the same time, the number of firms using Invoice Financing to help improve cashflow rose by 16% in the year ending April 2011, according to the Royal Bank of Scotland.
Mike Hutchinson, Bacs’ head of marketing, urges more SMEs to use automated payments if possible so they can better manage funds which are under their control.
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