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Late payments can push SMEs into bankruptcy

According to recent research by Bacs Payment Schemes, many SMEs are in danger of going out of business due to an increasing number of late payments. While the average amount owed is £36,000, many small businesses admit that only £20,000 worth of late payments is enough to close them down. While the issue is particularly acute in the south – where the average amount owed is £53,000 – the experience of small businesses in the Midlands and the North is little different when considering the ratio of average payment debt against the threshold of failure.

According to the research, by far and away the biggest factor related to the failure of small businesses is poor management of cash flow, often brought about by issues related to late payment. The research reveals that the average late payment is now 43.4 days after the stated payment terms. This delay is even greater in the north of the country and the research revealed that large companies seem to be the worst offenders.

A contractor accountant can advise on how a small business can ensure that late payment issues do not necessarily threaten its continuing existence. For example, the Bacs research showed that small business owners are being forced to spend, on average, 14 days each year pursuing overdue bills instead of running their company. There are services available that could alleviate late payment issues and a cheap accountant for contractors can advise if one of these might be appropriate.

Posted by Mark
October 8, 2012
Small Business

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