Pay.UK and the Chartered Institute of Credit Management commissioned a detailed analysis of the impact of COVID-19 and other economic factors on SMEs. The results found that over half of UK SMEs were hit by late payments throughout the pandemic, with a combined total of debt sitting at £17.5 billion.
The research was conducted to determine how many organisations were suffering from late payment issues and what impact this might have on the future of business. It is clear that the late payment issue is not improving, despite government efforts to tighten up the Prompt Payment Code.
However, there is some positivity hidden amongst these results. The total of payments owed to UK SMEs in 2019 was at an all-time high of £23bn, and it’s now fallen to £17.5bn. The average overdue amount has also dropped significantly to £20,000, compared to £25,000 in 2019. However, these results may be slightly skewed due to the reduction in business operations occurring throughout the various lockdowns of the last 18 months.
The research also showed that businesses are shelling out, on average £500 a month to chase monies, equating to almost £5bn for UK SMEs. This highlights that businesses should be seeking out partners who cap fees for debts under a certain age and also operate on a no collection, no fee basis – like us. We will only charge 15% on a debt that is less than six months old, and nothing if we are unsuccessful in reclaiming the debt. We are also able to provide access to Escalate, a no-cost litigation service. Frankly, businesses should be taking control of their debts before they ever reach the six-month mark, and the survey showed that over a third of small businesses are having to resort to various forms of finance to survive, and one in five are cutting directors’ salaries to balance cash flow.
Director of My Debt Recovery, Sean Husband, said of the latest statics: “Whilst it’s encouraging to see the drop in the overall total of late payments owed to UK SMEs, it is important not to lose sight of the fact that £17.5bn is still a huge sum of money that is restricting the growth of the lifeblood of UK business. As mentioned in this blog, it is also unclear if this drop is due to the lockdowns and restrictions of trading throughout the pandemic. It will certainly be interesting to see if the figures for 2021 follow suit.
“Late payments can cause a domino effect and debt can spiral as businesses on the receiving end of late payments will, in turn, be forced to pay their own suppliers late. So it is vital that organisations manage their cash flow and debt ledger closely. Outsourcing your debt collection function can be an effective way to manage relationships with late payers in a firm but professional manner and enable you to focus on running your business, whilst we do the leg work to recover what is rightfully yours.
With the reintroduction of some forms of winding up petitions, it is important to get to work on your debt collection now, before it is too late and your debtor has been served a winding up petition by someone else. We can help you to get your debt to the front of the queue.”.
If you need a trusted and professional partner to help with your commercial debt collection then reach out to our team of experts today. We’re here to help you determine the best course of action for your business, to act upon our recommendations and to make a real difference to your business by reclaiming what is rightfully yours. Contact us today.