Big business slowest to cough up their bills

British SMEs are apparently owed £24bn - and large corporates are still the slackest debtors...

by Dave Waller
Last Updated: 06 Nov 2012
According to Bacs, the organisation behind Direct Debit, 53% of the country’s SMEs have experienced late payment. We’re actually surprised the figure isn’t higher, with business of every kind scrabbling for ways to prop up their vulnerable cash flow. Nevertheless, that figure is still well up on the 45% recorded in June 2010 – which suggests life is getting increasingly tough for those at the end of the chain.

To make matters worse, these delays are getting longer. The average wait is now 39 days beyond agreed payment terms, up nearly eight days since June 2009. And the average owed at any one time is £27k – a significant chunk of change for any cash-strapped smaller business.

A third of SMEs reckon big businesses are the worst culprits when it comes to coughing up late, with smaller firms in the manufacturing industry most likely to suffer at the hands of dawdling big corporates. (By contrast, only 6% of SMEs had experienced late payment from the public sector in the last six months of 2010 – so despite their woes, these organisations are still paying up more promptly than most).

Bigger firms often tend to the worst payers, so this is hardly a new development – but it’s still infuriating, since they’re also the ones with the deepest pockets and the greatest ability to pay. And while delays are hardly welcome at the best of times, in the current climate, cash flow can become a matter of life-or-death.

But it’s not just the loss of available cash that ends up troubling SMEs. There’s also the burden of chasing up all these invoices, which takes an average of 3.4 hours a week. Bacs has deduced accordingly that UK plc is losing more than 158m man-hours just chasing bill settlement. It has developed a series of hints and tips for encouraging prompt payment – which, not surprisingly, includes the use of automated payments. Well, if the alternative is sending the heavies round…

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