With research showing UK businesses are owed a staggering £41.5 billion in late payments, the PACT Scheme is today launching to lead the fight against late payment. The average late payment burden shouldered by SMEs now stands at£31,901.
Often individual late payments can be fairly small but as more and more suppliers fail to pay on time, this can stack up rapidly.
Surveys have shown that 60 percent of companies have been negatively impacted by late payments. SMEs have been shown to spend up to an additional £677.00 a month on their overheads chasing late payments.
Companies with a turnover under £1million are now waiting an average of 72 days to receive payment from their invoices and the timing is currently increasing.
Nick Goodall, owner of Detail my Car, has experienced exactly this. He says, “As the owner of a small business, the age old mantra that time is money rings true. Therefore, time spent chasing unpaid invoices or even trawling through emails to see if a PO number has been sent is time which could be spent adding value to the business.
“Recently, an urgent job came in which I was more than happy to carry out but the £150 we requested was never paid. Of course it isn’t the largest amount of money at face value, but if you let one unpaid invoice go before you know it the debt can increase rapidly. I’ve actually taken a business to the small claims court previously for failing to pay, but of course the time spent and financial cost almost makes it a worthless exercise. Undoubtedly, there needs to be more support for small businesses to help eradicate the pain of late payment.”
Chris Hawthorn, the managing director of PACT Scheme, has founded the company in response to his own experiences of late payment in the past.
He says, “In 2005 I started a property marketing business and after a number of successful years, late payments had a crippling effect on the company. I was forced to invest personal savings into the business, which damaged relationships with my own suppliers by paying them late. Not having the necessary finances in place also resulted in lost productivity through time spent chasing unpaid invoices. Ultimately, this resulted in the business failing.
“Unsurprisingly, this experience means I am very passionate about the burden late payment puts on small businesses. It’s unforgivable that British businesses on average are owed £31,901. This could stop entrepreneurs being able to add an additional employee to the company, pay their overheads or make payments on existing loans.
This is why I’ve decided to start the PACT Scheme to support SMEs in the fight against unpaid invoices.
“The business is designed to increase the chance of businesses recovering debts while maintaining customer relationships using pre-agreed procedures and implementing genuine repercussions for late payers. Mediation will be in place as the first port of call to try to recover debt, while businesses which continue to refuse payment will be named and shamed onwww.defaulter.com. Partnerships are also in place with leading credit reference agencies to ensure late payers feel the repercussions directly through a drop in their credit score. I believe with these consequences in place, it won’t be long before late payment becomes a thing of the past.