Late payment ripple effect hits half UK firms

The ripple effect of late payments could be costing British businesses as much as £2 billion a year according to research released today which shows that for 1.35 million firms, one late payment instantly affects their suppliers.

The time devoted to chasing late payment has also increased during 2009 with 52% of small business owners saying it’s taking them longer to persuade customers to pay up.

The research of 876 businesses conducted on behalf of Bibby Financial Services found that 12% were spending three days or more a month chasing late payers.

These figures support data released earlier this year by payments system BACS which showed SMEs are owned £25.9 billion, up 40% on 2008.

In order to cover the shortfall created by delays in payment, small businesses are resorting to bank overdrafts (20%), loans from friends (10%) and family (10%), drawing on savings (5%) and in some cases using personal credit cards (3%).

All in all disappointing that more businesses of all sizes aren’t recognising that paying promptly is going to benefit all of us, but a sign of the times.

[Picture credit: laRuth licenced from Flickr]