SME’s are doing it for themselves!
New research from Bacs, the organisation behind Bacs Direct Credit, has revealed that over half of British SMEs (56%) do not anticipate any assistance from the Government in tackling the late payments issue, and that the number of companies feeling the impact of late payments in June 2010 has fallen by a massive 20% in just six months.
Mike Hutchinson, head of marketing at Bacs, believes this is largely due to the individual companies’ efforts and says: “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.”
However, there are still a massive 769,000 companies effected by late payments and Bacs’ research shows that the total amount of money owed to these companies is now nearly a third more (28%) than it was six months ago (£25,000 December 2009 compared with £32,000 in June 2010), with a massive £24.6bn in total now owed to businesses across Britain.
Hutchinson continues: “There is valuable help and advice available, through schemes like the Prompt Payment Code, for companies still suffering from late payments and SMEs will be well served to draw on all available resources to find new routes forward.”
For example, with many SMEs still highly dependent on cheques, a specific piece of advice from Hutchinson is for companies to consider adopting automated payments methods. Bacs’ research shows that 79% of SMEs still use cheques to pay bills and, with cheque clearing facilities due to be phased out by 2018, Hutchinson says: “SMEs should consider replacing the use of cheques with automated payment methods sooner rather than later. Automated payments offer many benefits in streamlining processes and helping cash flow, which companies can take advantage of now to help combat late payments.”
Bacs key late payments stats – June 2010
- 45% of SMEs nationwide have experienced late payments
- £32,000 – the average amount owed to a British SME at any one time, up from £25,000 in December 2009
- 769,000 British SMEs have experienced late payments, down from 961,000 in December 2009
- £24.6 billion - the total amount owed in late payments to British SMEs, up nearly £600 million on December 2009 figures
- 39.4 days – the length of time beyond agreed terms that British SMEs are waiting for payment, down from 41 days in December 2009
- 56% of British SMEs do not expect the Government to take action regarding late payments
- 26% ask for payment on receipt of invoice
- 48% of SMEs nationwide ask for payment 30 days / end of month after receipt of invoice
- 37% of British SMEs cite larger companies as the worst culprits of late payments
- 11% of SMEs identified that Government and not-for-profit organisations are responsible for late payment, up from 6% in December 2009
- 79% of SMEs continue to use cheques to pay other organisations, with a further 76% still receiving payment by cheque
For more information about late payments and how to tackle them head on, visit www.paymedirect.co.uk where Bacs has developed a series of hints and tips for encouraging prompt payment. You can also download a late payments map of Great Britain which shows regional and sector differences when it comes to late payment problems.
About the research
Bacs conducted independent market research with business to business specialists BDRC Continental.. In June 2010, we conducted 477 telephone interviews with FDs, MDs, and owners of GB SMEs. The sample was representative of the GB SME audience and was representatively divided as follows, North = 126 interviews; Midlands = 107; South = 244; Manufacturing sector = 136; Distribution sector = 179; Services sector = 162
About the Prompt Payment Code:
Bacs is working in partnership with the Institute of Credit Management (ICM) to drive further awareness of the Prompt Payment Code and promote the importance of paying on time, across the whole business community. Backed by the government, the Prompt Payment Code (PPC), launched by the ICM in December 2008, has been designed to encourage and promote best practice between organisations and their suppliers. The Code is hosted by the ICM at www.promptpaymentcode.org.uk