Late payments cost UK businesses an annual £46.1bn (US$72bn), according to research from Bacs Payment Schemes (Bacs).
Bacs reviewed small to medium-sized enterprises (SMEs) employing up to 250 people and larger corporates with more than 250 employees across the UK. The research found that SMEs carry the greater debt burden of £39.4bn, while larger corporates are owed only £6.7bn at any one time.
Sixty per cent of UK SMEs report experiencing late payments, with the average overdue payments figure at £38,186. One in four SMEs admits that if the amount owed reached £50,000 it would be enough to send them into bankruptcy. In contrast, the average corporate is owed almost £1m.
UK businesses also report that they bear additional costs of £9.16bn a year due to late payments, with 30% saying they spend around £500 per month due to money owed to them. The research suggests this monthly figure can rise to £10,000 once the various costs associated with bad debts are factored in, such as overdraft fees and admin costs. One in four companies spends over 10 hours a week chasing late payments.
The knock-on effect of late payments means that one in four companies pay their own suppliers late, with 21% saying that late payments force them to rely on bank overdrafts.
In terms of the extended period that companies are kept waiting for payment, 76% of companies surveyed said settlement was being delayed a minimum of a month beyond their agreed payment terms.
Businesses in Scotland and Northern Ireland experience the highest levels of late payments with 67% and 66% respectively claiming to have been left waiting for invoices to be paid. In England and Wales, the figures stand at 62% and 59%.
In terms of business sectors, the Bacs research reveals that companies in the manufacturing sector (72%) are most likely to be impacted by overdue payments, followed by businesses operating in the services sector (63%) and the transport, retail and distribution sector (48%).
“Despite the positive signs emerging about the financial state of the nation as a whole and the fact that we are thankfully moving out of recession, SMEs, which everyone agrees are the drivers of a successful economy, are being held back because of the increasing pressures of late payments,” said Mike Hutchinson, director of scheme support and development at Bacs.
On the second day of this year's AFP conference Trump's potential tax reform, using synthetic debt and the expected benefits of SWIFT GPI were all hotly discussed topics.
Today CGI and GTNews have announced the launch of the fifth annual Transaction Banking survey report, which offers which offers critical insight into the corporate-to-bank relationship.
On-Demand Treasury Management Solutions continue to gain increased adoption in the US and EMEA regions.
Treasurers are being expected to do more work with fewer resources than ever before, so it is little wonder that the automation of day-to-day operations was highly discussed on the second day of EuroFinance, the annual treasury event held in Barcelona this week.