Late payments to small businesses have jumped 40%, according to new research.
New figures from Bacs Payments Schemes Limited (Bacs), the organisation behind Direct Debit and Bacs Direct Credit, show that British businesses are owed £25.9bn in overdue payments.
The national average of outstanding payments was a ‘frighteningly high’ £38,000 in 2008 – up £8,000 on 2007 figures, while the number of small and medium enterprises owed money across the UK has increased to nearly six out of every ten – up from 57% in 2008.
Manufacturing has been the hardest hit, with 65% businesses in this sector experiencing a delay in invoices being paid, compared with 53% of those in the service industry.
Michael Chambers, managing director of Bacs, warned that action needed to be taken to help small business. He said: "This research demonstrates the pain being felt by many small and medium sized British businesses during these challenging economic times, and late payments could well be a major factor in the success or failure of these companies in the year ahead - SMEs are currently disappearing at a rate of 86 everyday.”
The most common cause of late payment is cashflow problems, with 24% of businesses saying this is the excuse they had received.
Bacs research into late payments also indicated that government's Prompt Payment Code has a lot of work left to do if it is to encourage swift settlement invoices. Small businesses are still waiting an average of 41.5 days beyond agreed payment terms for invoices to be settled.
© Crimson Business Ltd, 2009