News

September 28, 2010

Firms getting on top of late payments, but more money owed

Fewer small firms are chasing late payments than six months ago, but the total amount owed has gone up by almost £600 million since December 2009.

New research by Bacs, the organisation behind automated payments, has revealed that the number of British small and medium-sized firms experiencing late payments has dropped by 20 per cent since the last survey in December 2009 (961,000 to 769,000).

The average amount owed to a small or medium-sized firm at any time has risen from £25,000 to £32,000, however, and the total amount owed has now reached £24.6 billion.

The head of marketing at BACS, Mike Hutchinson, said the figures showed businesses were generally getting on top of their credit control. "It’s extremely heartening to see that there are now many companies making great strides to help themselves beat the late payments cycle, by sharpening up their billing and credit control procedures," he said.

However, Forum of Private Business (FPB) spokesman, Chris Gorman, said the Bacs figures and their own research suggested smaller businesses were still suffering – and the amount owing to them was piling up.

"We think a sizeable percentage of small businesses have got better at chasing late payers," he said. "The ones who haven’t got on top of the issue are finding the amount owed to them is building up.

"Our own figures are a little more pessimistic than the Bacs ones, though," Gorman added. "That’s because we have a greater concentration of smaller businesses. Late payments are still a serious issue for them."

The Bacs survey of 477 businesses also revealed regional differences in the money owing to firms. The number of businesses experiencing late payments in the North had almost halved (51 per cent down to 27 per cent), while the South experienced a drop and the Midlands a slight rise. The average amount owing to firms in the North had almost doubled, however, from £29,000 to £57,000.

The research revealed that the time taken to pay bills had fallen overall, from 41 days beyond agreed terms in December 2009 to 39.4 days in June 2010. Late payment by government agencies had increased, however, and more than half of businesses surveyed did not expect the Government to take further action on late payments.

• Find out what action you can take when payments are late on the Business Link website
• Calculate the interest owing on late payments with the tool on the FPB website