Late payments are an issue for more than half (53%) of Britain’s small and medium-sized businesses (SMEs), according to new research. The total owed to British SMEs by their customers currently amounts to over £225bn, with one in five (20%) owed more than £25,000, one in ten (8%) £100,000 or more, while 1% are waiting for upwards of £1m.
A threat to business
Late payments are causing serious problems for many SMEs, with 41% experiencing significant cash flow problems as a result. Even more worryingly, two thirds of SMEs (67%) agree that issues with late payments are leading to some SMEs being forced to close.
How to tackle outstanding payments
Despite many businesses feeling that more needs to be done, existing legislation can already provide SMEs with some much needed assistance. When faced with late payments by customers, businesses have several statutory tools at their disposal, including the ability to charge interest and recoup debt recovery costs
Late payments guidance for SMEs
If no term has been specified, a payment is considered late after 30 days from the day a customer receives their invoice, or 30 days from when goods/services are delivered, whichever is later.
If no interest terms have been agreed via contract, statutory interest can be charged at 8% plus the Bank of England’s base rate.
In addition to interest, businesses can charge a fixed rate (between £40 and £100 depending on the size of the debt) for the cost of recovering the debt. Suppliers can also claim for reasonable additional costs.
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