ARAG News

Trading times are tough...

22 July 2014

 The Financial Times recently reported on the burden of late payment borne by small businesseshttp://on.ft.com/1sJMBMt. The article refers to data published by Bacs Payment Schemes, the direct debit company. BPS estimates the debt burden on SMEs is £39.4bn, up from £30bn in 2013 and higher than a previous peak of £37bn in 2012.

  •  The research established that 60 % of SMEs are experiencing late payments, with the average company waiting for £38,186 in overdue payments.
  • 72% of companies in the manufacturing sector were affected by overdue payments, followed by those in services (63%) and the transport, retail and distribution sector (48%).
  • Businesses are incurring additional costs of £9.16bn a year because of late payments, with almost a third saying they were spending around £500 a month as a consequence of money owed to them. This figure could be as high as £10,000 a month as a result of the various costs associated with bad debts, including overdraft fees and administrative costs.
  • One in four companies is spending more than 10 hours a week chasing late payments.
  • The knock-on effect of late payments meant that a quarter of companies were being forced to pay their own suppliers late, with one in five saying late payments are forcing them to rely on bank overdrafts.

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