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SMEs lose out in late payment leaps

British small and medium sized enterprises (SMEs) are now owed £25.9 billion after overdue payments rocketed by almost 40% over the last year. That’s the latest finding from research conducted by the Bacs Payment Schemes Limited.

The number of SMEs finding themselves owed money across Great Britain increased to almost six out of every ten, up from 51% in 2007 to 57% in 2008. Manufacturing has seen the highest incidence of late payments, with almost two thirds (65%) of SMEs in this sector experiencing a delay in invoices being paid, compared with 53% of those in the service industry.

The most common cause of late payment is cash flow problems, with almost a quarter (24%) saying this is the excuse they are given.

Michael Chambers, managing director of Bacs, 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.

“Action must be taken to address this crushing payment issue; but businesses also have to take responsibility for helping themselves where they can. For instance, while the Government has brought in a system of paying public sector invoices within ten days, surprisingly, three quarters of British SMEs haven’t replicated that.”

Phil McCabe, spokesman for the Forum of Private Business, said: “The amount of money owed to small firms has soared over the past year.

“The problem has intensified as a direct result of the credit crunch and economic downturn, as credit from suppliers has increasingly dried up. With the knowledge that prompt payment can mean the difference between trading profitably and trading at all, many small businesses are now looking to the year ahead with considerable trepidation.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .