The Impact On SMEs Of Being Paid Late

If you are the owner of an SME who has experienced cash flow problems putting pressure on your business overdraft facility then the following statistics may not come as a surprise to you. The research that resulted in the production of the data was undertaken by Bacs Payment Scheme Limited (Bacs) and it makes for interesting reading.

SMEs are keen to take on work but being paid for it can present a few headaches and can increase administration costs chasing up monies that are owed by clients.

The research revealed that in 2017 a staggering 37% of SMEs encountered customers paying them late but this had risen by 6% in 2018 to 43% although the amount owed to each SME fell from £22,000 in 2017 to £17,000 in 2018. The knock on effect of this was that in excess of 25% of SMEs were late paying their own suppliers. This is a concerning factor as it has huge implications for owners of SMEs such as potentially meaning that the business has to cease trading that in turn can lead to more people being made unemployed and the business defaulting on finance arrangements.

In excess of a third of SMEs who are paid late have had to resort to using a business overdraft facility to help with cash flow. This is good news for the banks but means that the SME is paying more in interest charges.

78% of SMEs are having to wait for at least a month or longer than they should have been paid which again puts huge pressure on cash flow. It is interesting to read that 40% of SMEs say that it is large companies who are the longest at paying their invoices.

It is rather concerning that 11% of SMEs who have problems in collecting in monies from clients who are late paying actually pay someone to try to collect the funds. This is a potential additional cost that an SME could well do without as it puts pressure on the profits of the business.

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