A survey by Zurich, which featured in the latest Zurich SME Risk Index has revealed the magnitude of late payment on small businesses across the UK.
The findings which are based on over 1,000 small business owners revealed that the majority (53%) of late payments to small businesses are owed by companies bigger than them – leading some to conclude that larger businesses are taking advantage of the dependency of custom from SMEs.
However, looking deeper into the issue, the full scale of the impact of late payment is revealed with 64% of SMEs experiencing typical delays of more than one month on payments which are already more than 30 days overdue. 45% of businesses interviewed as part of the survey have had to wait up to 3 months to get paid, whilst a staggering 14% typically have to wait up to 6 months to receive payment.
Late payment for businesses can have devastating consequences especially in tough economic conditions and with the average small business owner being owed £16,250, this can drive small businesses into drastic measures. 24% of respondents revealed that late payment had caused their business to go into its overdraft. However, for some businesses this may not be possible, or the severity of the late payment can result in the closure of the company. The latest estimates published by the UK Government suggest that 50,000 business closures could be avoided every single year if payments were made promptly. With over 15 million people in the UK working for a SME, late payments can have grave impacts on their lives as well as those of the business owners.
Paul Tombs, Head of SME proposition at Zurich commented: “For small companies, working with larger organisations and strong brands is an important part of building and running a successful business. But, it is a two-way street and large organisations are simply taking too long to pay small suppliers, which are dependent on reliable, regular invoicing to cover their own costs. It is not sustainable,”
Such is the extent of the issues caused by late payments that a Small Business Commissioner will be employed by the Government, in part to help resolve payment disputes. Whilst this is no doubt a positive move to help minimise issues going forward, over 78% of businesses who took part in the Zurich survey were unaware of the Government initiatives to support small businesses – suggesting the major steps still need to be taken.
With over £45 billion currently outstanding in late payments to businesses across the UK, it’s clear that a tougher stance on late payment needs to be implemented. For many SMEs who may not have the capacity to pursue these payments, employing a debt recovery solicitor is the only option in ensuring debts are recovered. As well as recovering debts an effective debt recovery service can help reduce further incidents of late payment.
“We have been using Holmes & Hills’ Debt Recovery Service for just over a year, we feel confident that their legal expertise and guidance allows us to make good business decisions. Their professional and personal approach has enabled us to understand the complexities of the legal situations we encounter, and as a result we have reduced our aged debt considerably.” Accounts Manager, Ernest Doe & Sons Ltd.
To find out more on Holmes & Hills fixed-fee debt recovery service, which boasts a 94% success rate, please contact one of our specialist debt recovery solicitors on 01376 320456 (Essex) or 01787 275275 (Suffolk).