Bad debts - Barclays offers help
SMEs in the East of England, already struggling to cope with the effects of the economic downturn, are owed more than �939million on any given day because of suppliers or customers failure to pay on time, according to Barclays Local Business annual Late
SMEs in the East of England, already struggling to cope with the effects of the economic downturn, are owed more than �939million on any given day because of suppliers' or customers' failure to pay on time, according to Barclays Local Business annual Late Payments report.
The report reveals that on a typical day small businesses across the region are �1,833 out of pocket as a result of suppliers or customers failing to pay during the standard 30-day invoicing period. This total figure is up �159million on last year and has resulted in SMEs losing nearly �690million over the last 12 months due to non-payments - an average of �717 per business.
Neil Fewtrell, head of local business for Barclay's eastern region said: "Despite some recent positive economic signs, it's concerning that late payments are on the rise in the East of England. This is a serious issue for the businesses we talked to - almost half [43 per cent] say that it threatens their day-to-day survival.
"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 checking service. Credit checking services are a powerful tool for deciding who to do business with, and who will pay on time.
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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 businesses in the East of England 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.
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Businesses in London and the North West are most likely to be impacted by late payments, with 73 per cent of those interviewed admitting they were a problem. Payment delays were slightly less prevalent in the East of England, where 57 per cent of SMEs have been affected by suppliers or customers failing to pay on time.
Barclays Late Payments report also found that the problem is endemic. Nearly three million UK SMEs (around 60 per cent) have experienced problems with late payments - representing an additional 850,000 businesses compared to last year.
Approximately a third of these organisations (32 per cent) admitted that customers or suppliers failing to pay on time threatened their day-to-day survival.
Thirty six per cent - around 1.5million SMEs across the UK - have had to use personal funds to tide their business over while they wait for outstanding payments.
An additional eight per cent of small businesses now have to use debt facilities to boost cashflow compared with last year - equating to around 1.7million SMEs in total nationwide, Barclays said.
INFORMATION: The data were taken from online research carried out by Ciao Surveys on behalf of Barclays Local Business Banking. Total sample size was 750 SME owner-managers or senior decision-makers from across the UK. The figures have been weighted according to data from the Department for Enterprise and Regulatory Reform. See www.creditfocus.co.uk for more information on the credit checking service.
Barclays' top tips on tackling late payment
Credit-check your customers: Barclays offers CreditFocus to all small businesses, not just its own customers, which enables them to credit-check their five main customers, and automatically alerts them when a customer's credit rating goes up or down. Barclays customers can also follow up with a solicitor's letter. Visit www.creditfocus.co.uk to sign up.
Go electronic: Encourage your clients to pay you electronically, rather than by cheque - this will boost your cashflow and mean funds start to earn interest immediately.
Early reminders: Don't leave it until the last minute to chase customers or suppliers who haven't paid - being pro-active can often pre-empt a more serious payment problem and lead to a swifter solution that suits all parties.
Peace of mind: Run regular credit checks on new customers or suppliers - Barclays Local Business has recently launched its Credit Manager service, a web-based tool that helps SMEs understand how much credit to offer to customers.
Sort your system: Agree terms of payment at the start of all contracts to avoid any confusion, and monitor your payment system regularly so overdue invoices are quickly identified.
Manage your own finances: To save time, ensure you have online and telephone banking set up - this will enable you to manage your own finances more effectively, promoting healthy cashflow in both directions.