THE borough’s small businesses could be facing closure because of the amount of money they are owed by customers.
New research released by Bacs Payment Schemes, the company behind Direct Debit in the UK, suggests many small to medium-sized enterprises (SMEs) are in danger of going under as they are waiting on thousands of pounds’ worth of late payments.
The researchers warn of a crisis in late payments, with the average SME in the country now owed £36,000. Of those companies surveyed, 35 per cent said that having just £20,000 outstanding would be enough to put them out of business.
The total number of small and medium-sized firms in the UK now owed money has reached more than a million for the first time, and companies now have a collective debt of some £36.4bn.
The statistics also show companies are regularly being kept waiting more than a month for late payments, with SMEs not seeing their money, on average, until 43.4 days beyond the original payment date. Leading figures within the direct debit industry are now calling for urgent action to ensure businesses are paid what they are owed in order to aid economic recovery, and warn that unless more is done SMEs across Britain are heading straight for the edge of a financial cliff and bankruptcy.
Luisa Grey, a director with Cambridgeshire-based direct debit processing company Eazipay, said: “It’s a prediction that we have been making for the last three years, hoping that it would never happen, but it has.
“In total SMEs are owed an astronomic £36.4billion so it is no wonder that companies are going to the wall.
“Imagine what that amount would do to revive our sickly economy if it were released?
“But successive governments seem content to wring their hands in woe and sit back as each year the total increases.
“Behind every failed company statistic lies a real tragedy as viable businesses have to lay off staff and are forced into a situation where they are unable to pay suppliers. The depressing cycle of late payments, therefore, continues to fuel itself.
“Nothing is being done to seriously address this national problem.”
Eazipay, which provides direct debit services to more than 800 companies across the world, is advising SMEs to seriously consider moving as many of their clients on to automated payment schemes to try and solve the problem.
Ms Grey said: “We represent almost 1,000 companies and in the last three years we have lost less than 1 per cent as a result of bankruptcy.
“If your customers won’t agree to payments by Direct Debit then ask the question: “Do you really trust that they will pay your invoices on time and in full?”
“If the answer is ‘no’ then the next question has to be whether you can afford to wait for invoices to be settled.
“If the government won’t act on the behalf of SMEs, then they must act to protect themselves,”