In 2015, invoices were paid an average of 22.5 days beyond agreed terms. For businesses with less than £500k of turnover, the average delay in payment was 25.2 days – compared with 19.2 days for businesses with £3 million plus turnover. [Source: Hilton-Baird [pdf]]
As a direct result of late payments, 79% of businesses were forced to invest more time in chasing invoices, 48% had to pay their suppliers late, and 30% had to increase borrowing. 10% had to turn down new business. [Source: Hilton-Baird]
UK SMEs are building a collective debt of £10.8 billion a yearwhile attempting to recover overdue payments. That equates to £11,500 per SME, at £955 a month. [Source: Bacs]
The total 'late payment debt' for both large and small businesses in the UK is now over £31 billion. SMEs hold £26.8 billon of the burden. [Source: Bacs]
'Waiting for payment authorisation' is currently themost common excuse provided by debtors, followed by 'waiting for payment from their own customers'. [Source: Hilton-Baird]
Nearly three in five businesses have suspended work and services to combat late payment. 35% have used the Small Claims Courts or County Court Judgments. 29% have visited debtors in person. [Source: Hilton-Baird]
UK manufacturing SMEs have to wait nearly twice as long as large manufacturing businesses to receive payment. These SMEs waited for an average of 67 days (or over 13 working weeks) for invoices to paid, compared with the 42 days faced by larger manufacturers. [Source: ABFA]
Only 17% of businesses outsourceall or some of credit control. Cost is seen as the biggest barrier to outsourcing, followed by worries about degrading customer relationships. [Soruce: Hilton-Baird]
Overdue payments in the construction sector increased by 27% (year-on-year) in 2015 [Source: Euler-Hermes]
While some companies try their hardest to withhold payment for purely selfish reasons, many other companies are simply unable to pay up on time. This is certainly true in the construction industry, particularly when SMEs form every link of the supply chain. However, there's definitely still the perception that large construction companies 'bully' subcontractors and always take weeks or months to pay their debts.
Many in the industry would argue that the government needs to intervene further to prompt the worst culprits to change their ways. In the meantime, construction companies should pay ever-closer attention to their cash flows.
Accounting software vastly improves cost visibility for construction companies and contractors. You can also use it to track debts and chase up debtors in a more systematic way. These methods for reducing late paymentscan help to quicken your cash flow and enable you to forge ahead with new projects.
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