SMEs face late payment debt burden of £23.4bn

22nd November 2019

The UK’s SME late payment debt has risen to a staggering £23.4 billion, up £10.4 billion on the £13 billion owed in 2018 – according to figures released by Pay.UK, which runs the Bacs Direct Credit and Direct Debit payment services.

On top of that, the research shows that UK SMEs are now facing a total bill of £4.4 billion a year, just to collect money they are owed, with around a quarter (22 per cent) of those waiting on funds spending more than £500 a month chasing payments.

And the number of businesses experiencing overdue payments has hit 54 per cent among small to medium size companies; that’s the highest level since 2015, when the figure stood at 55 per cent.

The average late payment debt burden has also increased to £25,000 per company, up from just over £17,000 in 2018, with SMEs reporting that, on average, a debt burden of £35,000 could jeopardise their business.

Of those SMEs impacted by delayed payments, 63 per cent say they have a negative effect on their businesses. More than a third (35 per cent) are forced to rely on bank overdrafts, while almost a quarter (24 per cent) say that being paid late forces them to hold off paying their own suppliers.

Paul Horlock, Pay.UK CEO, said: “It is concerning that so many smaller businesses are struggling because of late payments in 2019, especially as there are so many ways they can now get paid. Offering customers a choice of payment or automated options can help remove barriers to make sure a bill is settled on time.”

The research also reveals that 13 per cent of SMEs experiencing late payments struggle to pay their business bills, 12 per cent have difficulties paying their own staff on time, and 10 per cent have to rely on invoice financing to draw cash into their businesses.

Other headline findings from the Pay.UK Late Payments research include:

  • Eight out of ten private sector late payments are owed to SMEs by other SMEs
  • 78 per cent of SMEs say they are being forced to wait a month, or longer, beyond agreed payment terms before being paid
  • Some 45 per cent of SMEs say they are being kept waiting two months or more before being paid
  • 24 per cent of business owners say they take a cut in their own salaries just to keep cash inside their businesses.