South: Late payments debt 'to put UK SMEs out of business'

As the number of UK small and medium-sized businesses facing late payments reaches more than a million – with a total collective debt of almost £36.4billion - research shows that many SMEs are in danger of going under.

Nationally, the average amount owed to one of the country’s SMEs is £36,000 – yet 35% of SMEs reported that late payment debts of up to just £20,000 would be enough to put them out of business, in a survey by Bacs Payment Schemes, the company behind Direct Debit and Bacs Direct Credit.

In the South, the average amount owed in overdue payments to the region’s smaller companies stands at £53,000, yet almost half (49%) of those surveyed said that it would take less than that – up to £50,000 - to put them out of business.

Midlands SMEs face similar problems; while the average outstanding amount is much lower, at £22,000, 37% of companies said unpaid invoices of up to £20,000 could cause their business to fail. In the North, where the average debt is £27,000, more than a quarter (27%) said the same.

The new research, carried out in July, showed that around six out of 10 UK SMEs (59%) experience late payments. In the South, the proportion of smaller businesses facing overdue settlement echoes the national average, ahead of northern companies at 55% but behind Midlands businesses (63%).

One consequence of the late payments culture is that hard-pressed businesses are being forced to invest an average of almost 14 days every year – or almost three working weeks - just in chasing overdue bills. Even based on minimum wage rates, that means delayed invoice settlement will cost smaller UK businesses just short of £700 million in 2012 alone*.

Nationwide, the majority (37%) say the worst offenders are large companies, although 25% of companies surveyed claimed fellow SMEs were also guilty of paying late. Government and not for profits were right at the bottom of the offenders’ list, with just 6% of SMEs experiencing late payments at their hands.

The most common excuse SMEs hear is that the delay is down to cashflow problems within the company being invoiced, with 47% saying this is the reason they’re given.