The amount of money small companies are due in payment has reached its highest level in almost 5 years, now more than £35bn, with total debts up by close to £2bn in 2012 compared to the first half of last year, according to Bacs. Small companies are increasingly suffering at the hand of large businesses who often insist on payment terms of 120 days or more.
The average small firm was waiting on approximately £45k worth of unpaid invoices at the end of 2011, up from £39k in the first half of the year, Bacs stated.
Big businesses were noted to be the worst payers, followed by the public sector, small and medium-sized firms (SMES) and individuals.
Although there are rules which allow businesses to add interest onto unpaid bills, they are rarely used and the government has still yet to determine an effective strategy to tackle the widespread issue.
Invoice finance for late payments
With late payment culture still engrained into UK enterprise, SMEs may benefit from taking out invoice finance facilities to help alleviate cashflow issues.
This form of external funding can unlock the cash tied up in unpaid invoices quickly and simply.
Invoice factoring can also help SMEs and small firms run their credit control procedures, which therefore not only unlocks cash quickly, but also works to reduce the amount of time debtors take to pay.