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News - 14 July 2012

Cash Flow and Late Payments hit SMEs.

According to research by BACS Payment Schemes Ltd Britain's small and medium-sized businesses are owed debts of £35.3 billion.

On the one hand the research showed that the number of SMEs subjected to late payment had actually decreased, down from 861,000 to 785,000 businesses. However, on the other hand, SMEs were owed more money than ever; on average, they were out of pocket to the tune of £39,000 at the end of 2010. By the end of 2011, the level of outstanding debt had risen to £45,000 for each firm. The combined debt owed has risen by nearly £2bn over the year from £33.5bn to £35.3bn.

The time to settle debts had also increased. In early 2011 small firms were waiting 28 days to receive payment. By late 2011, SMEs said they were waiting 29.6 days, longer than the agreed payment terms. Additionally 41% of SMEs said that big businesses were the "worst offenders" when it came to late payment, with big business being slower than individuals, other small businesses & private firms and even Government departments.

Tonmoy Kumar, Manager of the Accounts Department of ABDS says:
 “Ultimately the research points to the need for SMEs to better manage their cashflow. We would recommend automated payments to avoid the need for small and medium-sized businesses to have to "chase" their debts. Factoring and invoice discounting is another option open to businesses.”

If you need any help and advice for your business on reducing Debtor Days, cashflow and Payment Terms contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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