Businesses in the Midlands were owed £11.9billion in late payments in 2011 – up from £10billion in 2010 according to Bacs, the organisation behind Direct Debit and Bacs Direct Credit.
The average amount owed to each of the 277,000 businesses in the region in late payments, is currently £43,000, also up on 2010’s figure of £38,000, based on the research carried out among Britain’s SMEs.
More than half (56 per cent) of all businesses in the Midlands experience late payments, and 16 per cent admit to being ‘very worried’ about waiting for payment, to the extent they are constantly checking for it.
And, firms in the region are waiting on average almost twice as long to get paid than the original terms agreed with their customers. The majority of businesses in the Midlands (53 per cent) expect to have their invoices settled within 30 days, but on average have to wait another 25 days after that - making it two months before being paid.
The most frequent excuse businesses in the Midlands hear is that the hold-up is due to internal systems – 66 per cent say that the bill is being processed by accounts and 52 per cent say they are being told their invoice is waiting for authorisation. But the old chestnut of ‘the cheque’s in the post’ is still among the top excuses with 32 per cent of businesses giving this reason.
Mike Hutchinson, head of marketing at Bacs, said the issue of late payments is damaging to businesses which are relying on good cash flow to keep going through the fragile post-recession recovery period.
He says: “The problem of late payment is clearly getting worse for SMEs in the Midlands as the value owing is up by almost £2billion on last year’s figures.
“Nationally the value of late payments has reached a new high of £33.6billion, and at a time when firms in this region need to plan ahead for growth to ensure a strong cash flow, they are hanging on for payments which could have a serious impact on their business.
“We urge SMEs working in the Midlands to look at what payments can be automated to help them assert more control over their cash flow, and hopefully alleviate some of that stress on the business and its owner.
Philip King, chief executive of the Institute of Credit Management, adds: “This latest research reinforces how important it is that all companies, and more particularly SMEs, agree payment terms upfront and work to cultivate a prompt payment culture in all of their business dealings - one that will benefit everyone concerned.
“More than 1,000 companies have already shown their commitment to a more positive payment culture by signing up to the Prompt Payment Code, but these figures demonstrate that more companies need to change their payment practices in order to combat the detrimental effect of late payment on small business.”