New research, conducted among 876 business leaders shows that 2.38 million (53 per cent) UK business owners or managers are stalling payments to other parties in a bid to bridge the late payment gap. With 12 per cent of these businesses spending three days or more per month to recover payments, the potential cost to the economy is huge.
The figures highlight this ripple effect and the number of businesses that can be hit by the late payment chain. Indeed, for 30 per cent UK businesses, just one late customer payment can have a large impact on payments to all subsequent suppliers. And, worryingly, for half a million businesses one late payment can affect everyone they do business with.
Indeed, the research reveals 52 per cent of UK business owners are spending more time this year chasing late payments than last year, costing vital time and money at a crucial stage for the UK economy. This is supported by figures from Bacs which was released earlier this year which showed SMEs were owed £25.9 billion after late payments increased by 40 per cent on the previous year’s amount of £18.6 billion.
Late payment is shown to have far reaching consequences. For more than two in five businesses the single main outcome of late payment this year is an inability to pay suppliers. For a third it means a recruitment freeze and for 30 per cent it means a staff salary freeze.
Edward Rimmer, Bibby Financial Services’ chief executive, UK and Ireland, who commissioned the survey, commented:”While we’re all aware just how hard businesses are fighting for survival the research reveals just how shocking the impact of late payment can be. With credit still restricted and at a time when businesses are being squeezed at every turn, we urge businesses to support each other and do everything possible not to succumb to the easy route of late payment as it can become a vicious circle which halts the purchasing cycle and, ultimately, can disrupt the supply chain, not to mention the impact on the goodwill and trust of other customers and suppliers.”
The research also reveals the other and sometimes costly lengths to which businesses are going to bridge the growing problem of late payment:
- One in five rely on a bank overdraft, whether it be business or personal
- One in 10 resort to asking family members for a loan
- Eight per cent go to their friends
- Almost five per cent will use personal savings
- Three per cent will rely on a personal credit card
And when looking at how companies are currently managing late payment, 12 per cent of business owners and their staff spend three days or more each month chasing up late payments. A third spend just half a day per month, 30 per cent have a credit control department, and one in 10 use a factoring company to manage this process.