Our Debt Recovery Solicitors Can Help
According to the Federation of Small Businesses, c.50,000 SMEs close each year in the UK because of late payments. This is a shockingly high figure, which demonstrates how engrained the late payment culture is in this country. In this article, we look at why it is the SMEs that suffer the most from late payment and suggest how our debt recovery solicitors can help overcome this problem.
There are 5.9 Million SMEs in the UK
An SME is defined as any business with up to 250 employees and an annual turnover of up to £40 million, meaning that an SME can actually be quite a big business. There were c.5.9 million SMEs in the UK in 2019, according to government figures, representing 99% of all businesses in the country, and it is these businesses that suffer the most from late payment. Indeed, as the FSB has shown, the smaller the business, the harder it is to get paid on time, especially when they are suppliers to larger businesses.
Why do SMEs Suffer so Badly from Late Payment?
Recent research by Previse, the fintech and machine learning firm, who analysed over 10 million UK invoices, showed that businesses paid their smaller suppliers up to 30 days later (beyond the due date) than their biggest suppliers. Although late payments were rife throughout the supply chain, the biggest suppliers were paid much quicker, on average less than a day late.
Other findings included:
- Smaller businesses who invoice for values of less than £10,000 per annum are not even processed by buyers with larger businesses until 35 days after receipt, on average. This means that payment, which is typically due within 30 days, is already late before the invoice has even been approved.
- With larger suppliers, however, the invoices usually receive priority, only taking 3 days to be processed and approved, which means they are paid faster.
In other words, the late payment culture from large businesses to small business is hard wired into the system.
What can be done?
Large firms in the UK are now required by the Government to publish details of how quickly they pay suppliers. However, this is a global figure – they are not required to provide separate figures for how quickly they pay SMEs. This means that, although the average time for large firms to pay an invoice is 37 days, it hides the fact that for SMEs, the situation is much worse.
Invoice factoring/finance is used by many, but this can be costly. Clearly good credit control is important, but this cannot always work, hence the 50,000 SMEs per annum that go bust as a result of late payments.
The best thing to do is to consider issuing a Solicitor’s Letter Before Action, which is where our debt recovery solicitors come in.
Here at Lane and Co, we are the UK’s longest established firm of independent specialist debt recovery solicitors. We have recovered £millions in late payments for our clients since our foundation in 1978. Our Solicitor’s Letters Before Action work in over 90% of cases, and cost from £5 per letter. And we do not charge commission, unlike some of our competitors, meaning you get to keep all of the money we recover for you.
Talk to us About Debt Recovery
If your business is suffering from late payments, talk to our debt recovery solicitors. You may even be entitled to claim late payment compensation and interest under the Late Payment legislation. Contact us or call us on 01922 616306 for an initial discussion. If you decide to engage us, we can get a letter before action mailed out the same day, providing we are fully briefed before 3.30pm.