Bacs cookie policy

We use cookies on our website to provide you with the best possible online experience. By continuing to use this site, you give consent for cookies to be used. Please read our cookie policy for more information and details on how to change your preferences. Cookie Policy.

Late payments costing smaller UK businesses more than £2bn a year

11.7.2017

 

The UK’s smaller businesses are facing a total bill of £2.16 billion to chase overdue payments, according to Bacs Payment Schemes Limited (Bacs), the company behind Direct Debit and Bacs Direct Credit in the UK.

That’s in spite of a dramatic drop in the overall late payment debt, with new figures showing that UK small to medium size enterprises (SMEs) are owed £14.2 billion in contrast with five years ago when the total was double that, at £30.2 billion.

Out of the 1.7 million SMEs in the UK, almost 640,000 say they have to wait beyond agreed terms for payments. Scotland has the highest percentage of SMEs reporting late payment issues (46 per cent), followed by Northern Ireland (39 per cent), England close behind (37 per cent) while just over a third of Welsh SMEs (34 per cent) say they experience late payments.

Thirty nine per cent of companies are spending up to four hours a week chasing late payers, while 12 per cent of SMEs employ someone specifically to pursue outstanding invoices.  But there is light at the end of the tunnel - more than two thirds of those who don’t have a late payments problem say being paid by Bacs Direct Credit helps, while 29 per cent say the same about collecting monies owed by Direct Debit. 

Almost one in five (19 per cent) of SMEs affected by overdue settlement admit that being owed between £20,000 and £50,000 would be enough to drive them into bankruptcy, with seven per cent of businesses saying they are already in that danger zone.

Of those facing late payments, some 16 per cent struggle to pay their staff on time, while 28 per cent of company directors reduce their own salaries in order to keep essential working capital inside their businesses. And nearly a third (32 per cent) say that overdue invoice settlement forces them to pay their own suppliers late. A quarter (25 per cent)  rely on bank overdrafts to make essential payments, and  15 per cent find it difficult to pay business bills like energy, rates, and rent when they’re due.

A significant issue for SMEs is the amount of time they are being kept waiting beyond their previously agreed payment terms. Almost a third of companies face delays of at least a month beyond their terms and nearly 20 per cent are having to wait more than 60 days before being paid.

Mike Hutchinson, from Bacs, said: “Falling late payment totals is welcome news for small to medium size businesses and for the wider economy. It’s good to hear that relatively simple measures like collecting money by Direct Debit or insisting on payment by Bacs Direct Credit are helping to keep SMEs out of the late payments trap. We’d advise all businesses to investigate if automated payments can help them control their cashflow more effectively.”

For further information contact our press office​.​​​

 

Notes to Editors:

Research methodology:
The research was conducted by an independent market research agency, ACCORD Research, under the rules of the Market Research Society. ACCORD conducted 304 telephone interviews across a UK sample of SMEs. The data was weighted to be representative in terms of region, sector and size of organisation.

About Bacs:

Bacs has been maintaining the integrity of payment related services since 1968, with responsibility for the schemes behind the clearing and settlement of UK automated payment methods, Direct Debit and Bacs Direct Credit, as well as the provision of managed services for third parties, such as the Cash ISA Transfer Service, and the development, management and subsequent ownership of the Current Account Switch Service.

More than 120 billion transactions have been debited or credited to British bank accounts via Bacs since its inception; in 2016, nearly 6.25 billion UK payments were made this way, while a new record was set on 30 June 2017 with the number of transactions processed by Bacs in a single day reaching a high of 111.7million.

A not-for- profit entity which has maintained carbon neutral status since 2012, Bacs is a membership
company limited by Guarantee.

For further information please visit www.bacs.co.uk.

More about Direct Debit:

A Direct Debit is an instruction from a customer to their bank or building society authorising an organisation to collect varying amounts from their account, normally for regular payments for everything from household bills to charitable donations. Almost nine out of 10 British adults have at
least one Direct Debit commitment, with 73 per cent of household bills paid this way; 62 per cent of
people in GB prefer to pay most bills by Direct Debit, and the number of people who feel positively towards Direct Debit reached 77 per cent in 2016. Over 4 billion Direct Debits were processed in 2016, and Direct Debit payments are protected by the Direct Debit Guarantee, a money back consumer safeguard.

For more information about Direct Debit, visit www.directdebit.co.uk.

More about Bacs Direct Credit:

Bacs Direct Credit is a simple, secure and reliable service, which enables organisations of all sizes to
make payments direct into a bank or building society account - unlike cash or cheques, Bacs Direct
Credit payments cannot be lost, stolen or delayed in the post. 

There are more than 150,000 organisations in the UK using Bacs Direct Credit; while it has been widely adopted to pay benefits, wages and salaries – nearly 90 per cent of the country’s workforce is paid this way and one billion benefit payments are made via Bacs Direct Credit – it is also the payment method of choice for a range of other applications such as pension payments, employee expenses, insurance settlements, dividends and refunds.

Bacs also owns and manages the Current Account Switch Service, as well as operating the Cash ISA Transfer Service and the Biller Update Service. Find out more here.​