Late Payments: SMEs are owed almost £55bn

Small and medium UK businesses are owed more than £55 billion in unpaid or outstanding invoices, a new study has revealed. The study, conducted by the European payment systems provider Sage Pay, has found the average business is owed £11,358, with 44% of SME’s having experienced problems when their invoices were paid late, one in five were owed more than £30,000.

Businesses spend over two hours a month chasing unpaid bills. 15% of those surveyed said that they struggled to keep the business going as a result of the unpaid invoices, whilst 58% said that it impacted on their ability to maintain their day-to-day cash flow and 17% said that they had to cut back expenditure to cope with the delays.

Despite political pressure on larger corporations to pay their smaller suppliers on time, the sum has increased by over 50% since last summer. This has the effect of stifling growth and restricting cash flow for small businesses. 67% of SMEs said they still use paper invoices and spend the equivalent of two weeks per year chasing unpaid invoices. For one in ten businesses, a third of invoices are paid late.

Ade Potts, Managing Director for Experian Business Express, said: “Analysis shows that late payment is creeping up again, especially at the larger end of the business world.  There are steps SMEs can take to increase their chances of getting paid faster and a great place to start is credit monitoring. This will help to differentiate between those debtors that have the means to pay but have a track record of paying late and those that are unable to pay. Identifying these customers is the first step to devising a strategy for getting paid.”

Before you offer credit to a potential customer
Check they exist: Four out of ten businesses that start up never go on to trade. Beyond phone and email, check out the address to ensure they are who they say they are.

Obtain a credit report: Checking out their credit status and trading history will give an indication of their trading future, and show their ability and inclination to pay bills on time.

Monitor your customers on a regular basis
Over half of SME’s check their customers’ credit ratings once a year; this is not often enough to identify potential problems. You don’t have to manually check your customers – you can set up Monitoring Alerts through Experian Business Express so you’ll be the first to know if one of your customers or suppliers receives a CCJ or if they are struggling to pay their bills on time.