The total owed in late payments to UK companies of all sizes has fallen from an estimated GBP 45 billion to GBP 31 billion since July 2014, according to Bacs, the direct debit company, reports Sarah Gordon.
For smaller businesses (employing fewer than 250 people) late payments totaled GBP 26.8 billion, down from GBP 32.4 billion in July 2014.
However, Bacs notes that these companies were spending nearly GBP 11 billion a year – an average of GBP 11,500 each or GBP 955 a month - in their attempts to recover overdue payments, up from GBP 8.2 billion in July 2014.
Overdue payments are proving a strain for the business sector, the study suggests. A huge 80% of all companies which experience late payments say they are being kept waiting one month or longer beyond their agreed terms before receiving payment.
About a quarter admit that late payments are forcing them to rely on bank overdrafts (24%) and a similar number say that late payments are forcing them to pay their own suppliers late (26%).
When it comes to government initiatives to curb late payments, about a quarter (24%) say they are aware of measures to oblige large and listed companies to publish payment practices. However, some three quarters (76%) do not feel these measures could improve the speed their companies are paid.
While SMEs can charge penalties and interest for late payment, they fear losing business from big customers in retaliation.
In February 2015, the government announced plans to make 30-day payment terms the standard in the UK, with 60 days the new maximum limit, as part of a crackdown on late payment of bills.
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