Wholesale and retail businesses in the UK are facing outstanding payments of £1.2 billion, according to figures. A 40 per cent rise in late payments has caused £793 million of bad debt to be written off but businesses are fighting back against the downturn by checking up on their customers. Small and medium sized wholesale and retail businesses in the UK already struggling to cope with the effects of the economic downturn are owed £1.2 billion on any given day due to suppliers and customers failing to pay on time, according to Barclays Local Business annual Late Payments report.

The report reveals that on a typical day these businesses across England and Wales are £2,418 out of pocket as a result of suppliers or customers failing to pay during the standard 30 day invoicing period. This total figure has resulted in SMEs losing nearly £793 million over the last twelve months due to non-payments – an average of £1,552 per business.

John Davis, marketing director for Barclays Local Business said: “Despite some recent positive economic signs, it’s concerning that late payments are on the rise. This is a serious issue for the companies we talked to – around a third [29per cent] say it threatens their day-to-day survival.

Firms typically have to wait over almost a fortnight (13.3 days) after the invoice due date before they get paid.

Davis concluded: “The businesses that will survive and thrive during the downturn are taking late payments seriously. We’ve seen a massive take-up of our in-house credit management service. Credit checking services are a powerful tool for deciding who to do business with, and who will pay on time. Last year we began providing the service free to all small businesses, not just our own customers, and we’ve been overwhelmed with its popularity. It’s clear wholesalers and retailers alike are reacting to the downturn by keeping an even closer eye on their money.” Nearly 230,000 companies have been credit checked with Barclays CreditFocus service in under a year and 70 per cent of users who’ve chased a debt as a result have recovered some or all of the money owed to them.

Barclays Late Payments report also found that the problem is endemic and unlikely to go away: 56 per cent of wholesale and retail firms think the problem will definitely get worse over the next 12 months. 50 per cent of wholesale and retail businesses have borrowed money (loan or overdraft) to improve cash flow as a result of being paid late and firms spend on average 1.6 hours a day chasing late payments.

Image: business debt

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