According to a recent business survey, 27% of SMEs wrote off unpaid business debts in the past year. The average value of these invoices equated to £12,000. Transport and construction sectors were hit worst by bad debts, with 30% and 29% of businesses respectively having written off old unpaid debts.
Samantha White, CEO of My Credit Controllers commented:
Bad debts are a terrible challenge for smaller businesses. Unpaid invoices can lead to businesses struggling to meet their monthly commitments such as paying staff and their own suppliers. In this way the problem propagates down the supply chain. Businesses should take action promptly on unpaid invoices by seeking outside help from experts in debt recovery.
The impact on SMEs of delayed payments
An online survey from YouGov and ACI Worldwide has found that 48% of UK small to medium-sized businesses are frustrated by delayed payments. Research reveals a number of ways in which delayed business payments are negatively affecting wider business success:
- 33% of respondents say late payments affect their ability to meet financial obligations on time
- 17% feel late payments have a negative effect on payments related to salaries, expenses and recruitment
- 10% state access to finance is limited for business expenditure, such as equipment, product development, and research.
Given the detrimental effect of payment delays, it is not surprising that almost all small businesses surveyed (95%) believe real-time payments make a significant difference to their solvency. Over a quarter of respondents (29%) highlight faster payments as the most crucial banking service to business success in the current economic environment.
Among new financial products banks are now offering their customers, SMEs say that mobile and internet banking (64%) have had the most positive impact on their business, according to the survey.
However, the majority of SMEs feel that many of the new products offered, such as alternative financing (86%), P2P payments (89 per cent), biometric recognition (91%) and contactless payments (86%), have had minimal effect on their business.
Peterborough’s business people pledge their support for #PayFair
Local initiatives to get companies to pay to agreed terms, such as PayFair Peterborough have been rapidly gaining support from businesses. PayFair encourages Peterborough businesses to make a public pledge via the PayFair website to pay each other on time. Those that sign up are also encouraged to share their stories to demonstrate why late payment can be such an issue for companies, particularly smaller ones.
The idea for Payfair came from Maurice Power, Managing Director of Ferguson Financial Solicitors, a local law firm. He said:
We’re getting great support for the campaign and website, but it will only work if people act on their commitments and pay on time. It’s interesting that not many of the bigger names in the city have signed up at the moment – and they are the key to making this work. If we all respect one another’s terms, business in the city will thrive – to the benefit of everyone that works and lives here.
Businesses can sign up to PayFair at www.payfairpbo.com.