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Late payments total billions for SMEs

Almost three-quarters of small firms have been hit by the late payment of bills during the past year, new figures suggest.

A survey carried out by RBS and NatWest found that 71 per cent of SMEs have suffered from delays in payment in the last 12 months and that the overall worth of those invoices paid outside the period set down by the terms and conditions was a staggering £62.87 billion.

Of this total, some £15 billion was accounted for by invoices that were more than 120 days overdue.

The survey, which covered 500 firms, indicated that as many as 235,000 SMEs have had to invest time and effort chasing unpaid bills.

While larger firms have to shoulder a higher value of late payments, smaller businesses are hit the hardest because their unsettled bills represent a greater proportion of their turnover.

According to the survey, some 20 per cent of businesses with a yearly turnover of between £250,000 and £500,000 had to deal with the issue of delayed payments. For medium-sized to large companies, that figure was 7 per cent.

Despite the scale of the problem, the RBS/NatWest study revealed that less than half of the SMEs affected took action to boost cashflow. Only 11 per cent hired an in-house credit controller, only 9 per cent used invoice discounting and only 8 per cent turned to factoring as a way of reducing the amounts owed them.

Peter Ibbetson, chairman of small business banking at RBS/NatWest, said: "Bad debts and late payment of invoices are endemic problems for UK businesses. For more than one in ten firms, over 60 per cent of all their invoices are paid late, causing major cash flow problems for many."

Separate research from Barclays Bank has calculated that around 720,000 SMEs wrote-off an average of £2,529 each in bad debts last year.