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SMEs owed £55bn in outstanding invoices

Date Added: 14/02/2014  

UK small to medium-sized enterprises (SMEs) are currently owed a combined total of £55 billion in unpaid or outstanding invoices, according to new research from Sage Pay.

The survey revealed that SMEs are short an average of £11,358 due to customers neglecting to pay on time or at all. Furthermore, one in five are owed more than £30,000.

Business owners spend the equivalent of two weeks of each year chasing up unpaid invoices, with 67 per cent still issuing paper bills.

Simon Black, CEO of Sage Pay, the company conducting the research, comments: "For smaller businesses in particular, this delay in payment can cause significant problems and can affect the overall performance of the company."

Research from the Federation of Small Businesses (FSB) provides further evidence that customers are failing to pay SMEs on time. In fact, 51 per cent of large businesses are neglecting to pay smaller enterprises on time for goods and services they have received. 

The FSB examined the impact of late payments and discovered that it had reduced profitability for 34 per cent of the respondents and 29 per cent said it had restricted business growth. Furthermore, being paid after the agreed date caused 32 per cent of the participants to pay their own suppliers late.

However, small businesses can take certain steps to encourage customers to pay on time.

Send an invoice

Always send an invoice detailing the goods or services provided with a breakdown of the costs the customer needs to pay and by when.

Remind customers

On the invoice, include a statement that says if they don’t pay on time the business is entitled to charge them interest on unpaid bills, under the government’s Late Payment Directive.

Chase unpaid invoices

Don’t be afraid to get on the phone and ask for the bill to be paid. If that doesn’t work, write a formal letter on company paper or ask a solicitor to contact the client.

Court action

If the client fails to pay after you have contacted them then take court action. Click here for more details.
 

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