UK's late payment mountain grows to £62.87 billion

• Late payments affects nearly three quarters of SMEs but less than half have taken steps to alleviate the problem
• UK businesses have invoices worth £15.7 billion more than 120 days in arrears
• Small businesses are hardest hit by wasting valuable time pursuing slow paying customers

New research from NatWest and RBS reveals that 71% of SMEs in the UK have suffered from late payments over the last 12 months, with the collective value of invoices paid outside of the stipulated terms and conditions estimated at £62.87 billion. As a result, 235,000 SMEs claim time wasted chasing debt has adversely affected their business.

Whilst larger companies have a higher value of invoices paid late, as a proportion of turnover it is smaller businesses which are worst affected. For example, one in five (20%) businesses with an annual turnover of between £250,000 and £500,000 has suffered. This compares with just one in fifteen (7%) of medium and large businesses. For businesses with a turnover between under £1m, the equivalent of 12% of their annual turnover is paid late.

Despite these problems, the research reveals that less than half (45%) of SMEs have taken measures to improve their cash flow. Of these businesses, around one in ten (11%) have hired an in-house credit controller. Only 9% have used invoice discounting and 8% have used factoring, both of which are effective means of plugging a cashflow gap and are now widely recognised as appropriate alternatives to mainstream funding methods.

Peter Ibbetson, Chairman Small Business, NatWest and RBS said: "Bad debts and late payment of invoices are endemic problems for UK businesses. For more than one in ten (12%) firms, over 60% of all their invoices are paid late, causing major cash flow problems for many. What's concerning is that so few are making use of services from their bank to help alleviate the problem.

"For businesses trading on short-term credit there are financial solutions available which enable them to turn unpaid invoices into working capital. For example, RBS Invoice Finance is ideal for businesses looking to take control of cash flow and fund growth. It can give businesses an immediate cash injection of up to 85% of the value of unpaid invoices.

"The reality for most small businesses is that they are too busy to spend time chasing payment and managing debtors. However, our Invoice Finance team can pick up the burden of chasing payments and help protect businesses by safeguarding their financial supply chains."

Late Payments by sector

Late payments are most prevalent in the wholesale industry with 93% of firms reporting that they have experienced late payments in the last twelve months. For one in five (19%) business services companies, over 60% of all payments they received were paid late. The retail industry has fared the best with late payment figures below the UK average of 71%.

Industry	Experienced late payments	Number of companies that said over 60% of all payments were late
Wholesale	93%	11%
Manufacturing	81%	18%
Construction	80%	11%
Business Services	72%	19%
Retail	66%	8%
UK Average	71%	12%

The invoice finance solutions offered by NatWest and RBS include factoring and invoice discounting converting unpaid invoices into immediate liquid funds; bad debt protection to protect firms if their customers become formally insolvent; asset-based lending, enabling firms to use assets to raise additional funding. RBS Invoice Finance's FacFlow facility enables businesses to manage and monitor their invoice finance facility online.

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