More than £24 billion is owed to small and medium-sized businesses in Britain, much of it from large corporates that are failing to honour payment terms.
Late payment research from Bacs, the company responsible for Direct Debit, shows a third of SMEs reporting that big businesses are behind late bill settlement.
Those operating in the manufacturing industry are most likely to suffer delays at the hands of the big corporates, with 41% of the sector’s SMEs experiencing late payment blaming large companies for overdue invoices.
Bacs’ latest survey reveals that more than half (53%) of the country’s SMEs have experienced late payment, up from 45% in June 2010.
The average amount owed to an SME at any one time stands at £27,000.
Bacs claims that when SMEs do finally receive what they are owed, the length of time they have to wait is an average of 39 days beyond agreed payment terms, an increase of nearly eight days on figures from two years ago.
It says that figure rises to almost 50 days within the distribution sector, while businesses in the north of the country are waiting an average of 52 days longer than anticipated.
“Late payment remains a big problem for British SMEs with billions overdue against bills, causing small businesses to use up millions of man hours in chasing invoice payment,” said Mike Hutchinson, head of marketing at Bacs.
“Cash flow is an essential business priority, particularly in a period of economic uncertainty, and we urge SMEs to consider turning to automated payments wherever they can to manage the money which is under their control.”
It is not only late payments that are weighing heavily on companies’ finances. The burden of chasing overdue invoices means small businessses now typically spend half a day a week chasing payments. That equates to more than 158 million lost man hours lost to the British economy, according to Bacs.