The research into late payment shows that SMEs are incurring a collective £10.8 billion a year in their attempts to recover overdue payments — that’s an average of almost £11,500 each. That compares with a total cost of £8.2 billion in July 2014.
In addition, four-fifths of those are being kept waiting one month or longer beyond agreed terms before receiving payment.
About a quarter admit that late payments forced them to rely on bank overdrafts and a similar number said that late payment has resulted in them in to paying their own suppliers late.
As part of a crackdown on late payment, in February, the government announced plans to make 30 day payment terms the standard in the UK, with 60 days the new maximum limit.
When asked about the government`s initiatives to curb late payments, about a quarter of those surveyed said that they are aware of measures to oblige large and listed companies to publish payment practices. However, some three quarters did not feel these measures would improve the speed their companies are paid.
Paul Davies, from the debt collection agency, Debtcol commented that, "The research shows that late payment is still an issue for many businesses. Putting aside the obviously cashflow issues, the figures demonstrate the actual costs of chasing overdue payments”.
“However, business should be looking to recover the costs of collection, either through properly worded terms and conditions or using the Late Payment of Commercial Debts (Interest) Act”.
For more advice on debt collection or information on recovering your collection costs please speak to us.