Late payments add up to £46bn - Palmers Solicitors

Late payments add up to £46bn

New research from payment services specialist Bacs has revealed that UK businesses are struggling under a £46.1 billion debt burden.

Findings published on 10 July from a Bacs survey of 350 small and medium-sized enterprises (SMEs) and large companies suggest that across the UK, SMEs are carrying a £39.4 billion debt and corporates £6.7 billion.

A total of 60 per cent of SMEs were experiencing late payments, with the average SME waiting for £38,186 in overdue payments. In contrast, the average large corporate was owed almost a million pounds.

One in four SMEs said that if the amount they were owed grew to £50,000 it would be enough to send them into bankruptcy.

Around a third (30 per cent) of businesses said they were spending around £500 a month as a consequence of money owed to them and the research found the figure could climb as high as £10,000 a month as a result of costs associated with bad debts, including overdraft fees and administration costs. 

More than three quarters (76 per cent) of companies surveyed said that settlement was being delayed by a minimum of a month beyond their agreed payment terms.

Bad debts are bad news for any business, so where debtors are causing problems, seeking expert legal advice can be a sensible investment in securing money owed.

At Palmers, our debt and insolvency services include assisting clients in issuing statutory demands, which can be used to claim payment of a debt from an individual or company. If the debt is not paid, or there is no agreement to pay within 21 days, whoever issues the statutory demand can then initiate the winding up of a limited company if the amount owed is more than £750.

We can also advise on issues such as updating terms and conditions of business to include charging interest on debts or amending them to take advantage of the Late Payment of Commercial Debts Act 1998.

The Act enables interest to be claimed on debts owed by other businesses and public sector organisations, for up to six years after a late payment has been received. If business terms and conditions include an interest rate chargeable on late payments, this will take precedence over the interest rate set out in the Act and Palmers can arrange for these to be updated so that you can take advantage of the rate in the Act.

For more information, please visit our website or contact Andrew Skinner.