Small companies are the heart of the UK economy, but this ongoing fight between what is owed and what it costs to get that money back is causing a lot of financial damage to many of these businesses. But what exactly does it cost to collect late payments for the average business, and is there any way to avoid it?
The Ripples Of Late Payment
Many business owners who experience a delay in payments from their customers often have to pay their own suppliers late as a result. Research from BACS Payment Schemes shows that 28% of these business owners have admitted that they have had to cut their own salaries to keep cash flowing inside their business; this includes ensuring their employees are paid, and that they can pay for the supplies and equipment that they need to keep operating. This is an incredibly dangerous position for any business to be in, and for small businesses, it can be fatal.
Needless to say, the cost of collecting late payments for these small businesses is far too high, and the delay that the companies experience has a much wider reach than anyone could ever expect. Around a quarter of SME’s have revealed that paying their suppliers late is one of the few ways they can keep the balance of their business’s finances intact, but this means that suppliers (who could also be SME businesses) are then receiving late payments, as well. This is a vicious circle, even if the suppliers are larger organisations and companies, because it still means that someone in the chain of the business is not receiving their payment on time. This disrupts many business partnerships, and it really is down to the supplier to decide whether or not they’re happy with a late payment.
The survey carried out by the BACS Payment Schemes team also revealed that there has been a rise in the percentage of SME businesses who have been experiencing late payments. In 2018, this percentage is up to 43% from the 37% it was in 2017. Last year saw approximately £13 billion in late payments across the UK alone. Thankfully, the average amount that a company was owed has decreased from £22,000 in 2017 to £17,000 in 2018. We can only hope that it falls again in 2019.
The Domino Effect
These late payments create a domino effect through the entirety of the United Kingdom. Every business who is experiencing a fight with late payments is having to work harder, but because of the lack of cash flow, they can’t invest or grow. The cost of collecting late payments in the UK is a dire situation for many businesses. For some, it’s an inconvenience, for others, it affects how much cash they can pay out for the things their business needs, and for others, their business may go under because they can’t keep up with the never-ending situation. This is definitely something that needs to be rectified, and hopefully the data that has been revealed can help with that in 2019.
At Debtcol, we specialise in helping businesses retrieve what is rightfully owed to them, without racking up even more debt in the process. We’ve spent years dealing with debtors, serial late payers and other debt collection institutions, so we have the legal know-how to make sure you’re not only paid what you’re owed, but get paid on time in the future. We can handle one-off debt collection or multiple debt collections, and we can even provide ongoing outsourced credit services and business investigation, so you can be confident that you are only dealing with businesses who will actually pay you for your services. For more information, please just get in touch with us today.