The amount owed to small and medium-sized businesses in late payments has reached an all-time high of £33.6 billion since the first Bacs late payments survey in September 2007, research finds.

The amount owed to small and medium-sized businesses in late payments has reached an all-time high of £33.6 billion since the first Bacs late payments survey in September 2007, research finds.

The new data from payments company Bacs reveals the average overdue amount outstanding to small and medium-sized businesses (SMEs) is a record £39,000 and they are having to wait even longer to be paid than last year.

In total, half of all UK SMEs are currently experiencing late payments from customers, with business owners saying they are waiting on average 28 days more than the original payment terms to have their invoices settled.

The worst offenders for paying late are large companies which are behind 48 per cent of SME late payment debt, followed by public/private companies at 20 per cent.

Government and not-for-profit are among the best payers, with just 9 per cent of SMEs experiencing overdue payments from this quarter. The hardest hit sector is retail and distribution which is owed £16.6 billion.

The most frequent excuse businesses hear is that the hold-up is due to internal systems – 55 per cent say they are being told their invoice is waiting for authorisation with the same number hearing that the bill is being processed by accounts. The excuse “the cheque’s in the post” is used by 41 per cent of businesses.

Mike Hutchinson, head of marketing at Bacs, says that 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 issue of late payment is continuing to get worse for SMEs in the UK at a time when they need to be able to plan ahead for growth and ensure a strong cash flow, but instead they are hanging on for payments which could have a serious impact on their business if they are continually late.’

Philip King, CEO 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.’

See also: Late payment lifeline