SMEs owed billions in late payments

SMEs owed billions in late payments


Small and medium-sized enterprises (SMEs) are owed £39.4 billion in late payments, research by Bacs Payment Schemes (Bacs) has found.

Bacs, the company behind automated payments such as Direct Debit, surveyed 350 firms and found that UK firms are owed £46.1 billion.

SMEs are being forced to shoulder most of the debt burden as corporate firms are owed £6.7 billion in comparison.

Key findings:

• 60% of SMEs are experiencing late payments 

• the average SME is waiting for £38,186 in late payments 

• 1 in 4 SMEs believe they would go bankrupt if the total amount owed grew to £50,000 

• 25% of firms have paid their suppliers late as a result of delayed payments 

• 21% say that late payments force them to rely on bank overdrafts 

• a quarter of firms spend more than 10 hours per week chasing debts. 

SMEs are also paying additional costs of £9.16 billion a year as a result of late payments such as overdraft fees and admin charges.

Nearly a third (30%) of surveyed firms reported that they spend around £500 per month as a consequence of delayed payments.

Other key findings:

• Scotland (67%) and Northern Ireland (66%) have the highest levels of late payment among SMEs 

• 62% of businesses in England and 59% of firms in Wales are owed money 

• firms in the manufacturing sector (72%) are most likely to have late payment problems 

• firms in the services (63%) and the transport, retail and distribution sectors (48%) also are vulnerable to late payments. 


Nigel Holland from Holland & Co Chartered Accountants said:

“ Late payments of invoices owed to SMEs has a domino effect. If one company can not or will not pay its suppliers on time then this makes it difficult for the supplier of this company to pay its own invoices.

The Government could deal with this problem in its Small Business Bill because small businesses find it difficult to effectively lend money out interest free.

The Prompt Payment Code should have more power so that smaller firms can be protected. The EU Late Payment Directive already states that if payment terms exceed 60 days, they must explain why.”