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January 25, 2013

UK SMEs turn away business to avoid late payment

Over a fifth (22%) of UK small businesses have declined to do future business with customers who have paid late in the past. These are the findings of a new YouGov poll conducted on behalf of Barclays.

The news comes at a time when UK small businesses are owed more than £36 billion in late payments, according to research by Bacs. The survey finds that 85% of UK small and medium-sized businesses have been adversely affected by late payment in the past two years. Nearly half of these businesses (47%) claim their worst repeat offenders pay late three times a year or more.

Sue Hayes, managing director of Barclays business banking, said: "With one in five businesses that cease trading citing bad debt as the reason, it is vital that SMEs tackle this problem and take action before it is too late."

The survey also highlights the impact of late payments on business owners – with 30% of respondents saying they have used personal money or assets to boost their cash flow. In addition, 20% have suffered extreme stress and in 11% of cases, the late payments have nearly caused a business to fail.

Two thirds (66%) of respondents say that on average they have had to wait more than a month past the agreed payment terms for a bill to be paid, whilst 11% say they have to wait more than six months.

Sue Hayes added: "Faced with a continually challenging business environment, small businesses clearly have no other option than to take action against customers who repeatedly pay late. Whilst it goes against all natural business instincts to turn customers away, it is entirely understandable."

Those businesses that are not in a position to refuse future custom from late payers have taken action in other ways. The survey found that 60% have chased the customer's finance team, 32% have threatened to or have taken out legal action, and 30% have requested payment up-front.