Overdue invoices are bringing down the UK business economy

Many UK businesses are bearing the brunt of the recent recession and the slow recovery in the form of cashflow problems. According to statistics released by BACS, the organisation behind Direct Debit, a large proportion of this is due to late payments for goods and services and overdue invoices. Consequently, these unsettled accounts have a ripple effect on what is an already-beleaguered economy, causing more financial struggles for hard-pressed SMEs.

Unpaid Invoices

According to NatWest, one in five companies is owed between £50,000 and £100,000 in unpaid invoices. Perhaps even more worryingly, the figures from BACS suggest that it is the larger corporations who are most responsible for this shortfall, owing SMEs around £24billion per year in late payments, leaving most SMEs thousands of pounds in the red due to unpaid invoices. In addition, the BACS study goes on to reveal that around 33% of larger businesses are late in settling their accounts, often as late as 52 days. The impact on the economy is also highlighted through the revelation that around 158million man hours are lost each year in chasing overdue accounts.

As if these figures weren’t startling enough, cashflow problems prevent businesses from thriving and expanding and, ultimately, prevent them from employing other people. There is far more to unpaid debt than just an outstanding invoice. The consequences are far reaching, effecting every aspect of British business.

 

Prevention is better than Cure

In the long term, prevention is better than cure. Businesses would be well-advised to implement incentives for their customers to pay on time, such as fast-payment discounts or additional charges in the event of late payment. 

However, there will always be instances where other means are required. The government are currently discussing the option to fast-track the EU’s Late Payments Directive. But until then there are free services, such as ComparetheDCA, through which companies of any size can find the DCAs that are best suited to their case. This is particularly useful for SMEs who want to balance their books before becoming another economic statistic.

www.ComparetheDCA.com