SMEs crippled by late payments
Article Date: Nov 12 2009
Late payment continues to be a problem
Bad debts continue to hamper the ability of growth companies to beat the recession. Some 91 per cent of businesses have seen defaulted payments rise, new research has found.
The vast majority of companies have seen an increase in late payments over the past 12 months, according to business services company Creditsafe. Almost three quarters (74 per cent) of UK companies are concerned about their exposure to bad debt, while 16 per cent of businesses are very concerned that their levels of bad debt will impact their enterprises’ viability in 2010.
David Knowles, business development director at Creditsafe, says: ‘The ability of the UK economy to rise out of recession may be strangled by bad debt. Many companies are carrying huge levels of debt on their balance sheets which, if not recovered, could see a dramatic increase in businesses entering administration.’
Of the 1,000 companies surveyed, 4 per cent said they are awaiting payment of at least £100,000 from creditors, while one in ten companies say they have bad debts of at least 20 per cent of their annual profits.
The number of businesses going into liquidation in the third quarter was 14.6 per cent higher than in the same period a year ago, according to the Insolvency Service.
It is not just bad debt that is a problem. Many of the Company's, mainly large ones, have changed or insisted on new payments terms taking them from 30 to 60 or 90 days. The SME does not have a choice if they want to continue with the business. They become a bank for these other companies.
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