SME Business News

British small and medium size enterprises (SMEs) are now owed a massive £25.9 billion after overdue payments leapt by almost 40 per cent over the last year, up sharply form £18.6 billion. That’s the latest finding into the problem conducted by Bacs Payments Schemes Limited (Bacs), the organisation behind Direct Debit and Bacs Direct Credit.

While the national average of outstanding payments was astonishingly high in 2008 - £38,000, up £8,000 on 2007 figures - it’s the Midlands which has been hardest hit with the average SME claiming overdue invoices amounting to an incredible £69,000.

The number of SMEs finding themselves owed money across Great Britain also increased to almost six out of every ten, up from 51 per cent in 2007 to 57 per cent in 2008. And it’s manufacturing which sees the highest incidence of late payments, with almost two thirds (65%) of SMEs in this sector experiencing a delay in invoices being paid, compared with 53% of those in the service industry.

Bacs research into late payments also indicates that Government’s Prompt Payment Code has some in-roads to make if it’s going to encourage swift settlement invoices. This latest business omnibus shows that UK SMEs are waiting an average of 41.5 days beyond agreed payment terms for invoices to be settled.

The most common cause of late payment is cash flow problems, with almost a quarter (24%) saying this is the excuse they’re given. There are differences across industries, though - SMEs in the service sector cited the economic downturn as the reason they were given most often (16%), where as 35% of manufacturing and 30% of distribution SMEs were told cash flow was the issue.

If your business is finding cash flow an issue, you may wish to consider factoring or invoice discounting to provide you with valuable working capital. This is the ideal time to remember the old adage – “Cash is King”!