Late payments nearly double debt owed to SMEs
If your business is suffering from unpaid bills, you are far from alone. Over half of UK SMEs are suffering from overdue payments according to a study released in November, with resulting overall debt rising from £13bn in 2018 to £23.4bn.
The poll by Pay.UK also shows that three quarters of SMEs are having to wait a month or longer over the agreed terms for payment, with 45% waiting two months or more. The amount businesses are spending on chasing money owed has also risen, with just over 20% spending over £500 a month chasing payments.
As the average debt burden per business has increased to around £25,000 from just over £17,000 in 2018, businesses are now struggling to meet their own costs. A third are relying on bank overdrafts, with around a quarter reporting their own late payment problems mean they have had to delay payments to their suppliers. Paying staff and business bills has also become more difficult.
Plans announced in June that moved responsibility for the Prompt Payment Code to the Small Business Commissioner were intended to herald strengthened measures against late payment. The proposals involved imposing fines and binding payment plans, as well as holding company boards accountable for supply chain payments and setting up a fund to help businesses use technology to improve payment management.
There are already reporting requirements for large companies to disclose payment terms and practice, but compliance is poor. Signing up to the Code is also voluntary, except for suppliers bidding for public contracts of over £5m. From 1 September, such businesses must demonstrate they have effective payment systems in place to comply.
The lack of enforcement provisions in the new measures have been met with criticism. Alternative proposals from the Association of Accounting Technicians for companies with over 250 employees to be forced to sign up to the Prompt Payment Code and meet 30- rather than 60-day payment terms have received the backing of nearly three-quarters of MPs.
With the latest figures showing that supply chain payments are an escalating issue, the major political parties have included the issue in their manifestos. Meanwhile, if your business is affected by late payments, please let us know if we can help.Talk to Barnes Roffe today