New research suggests that SMEs in the UK are being kept waiting an average 41 days over agreed payment terms for invoices to be reconciled. The research was conducted by Bacs Payment Schemes Limited. Their findings show an increase on last year when waiting times were an average of 31.5 days longer than agreed.
Managing director of Bacs, Michael Chambers, said: “Small businesses rely on receiving payments on time so that they can maintain cash flow and ensure the business can run on a day-to-day basis. Our research highlights the continued widespread nature and real impact of the late payment problem, which was affecting 961,000 SMEs in December last year – that’s a massive 57 per cent of all British SMEs.”
The data gathered points to larger companies as the worst culprits, according to 37% of SME’s who took part in the research. 17% laid the blame with other SMEs and the same proportion of respondents pointed the finger at sole traders. Only 6% of respondents fingered charities and government departments as bad payers. Of course, Alistair Darling pledged in the 2010 budget to cut government payment terms from 30 days to 5 days.
Mr Chambers concluded:“SMEs need to be proactive in improving their payment collection processes. Accurate, efficient and prompt invoicing, which clearly states the agreed payment terms, is a must. Nearly 90 per cent of SMEs receive cheques as payment and a similar number of SMEs make payments by cheque, and with cheques soon to be a thing of the past, businesses should be encouraging payment direct into bank accounts, using payment mechanisms such as Bacs Direct Credit.”