Small businesses in Northern Ireland are owed £3.1bn in late payments and as a result carry an average debt burden of around £63,000 each – an increase of £40,000 per business in just over six months.
These are the shocking findings from research recently undertaken by Bacs Payment Schemes Ltd (Bacs). The study showed that Northern Ireland businesses were owed £63,000 in late payments in February 2013 compared with £23,000 back in July 2012.
The number of SMEs experien-cing late payments has also increased, up from 40,000 in July 2012, to 49,000 in December 2012.
Overall, the research from Bacs, the company behind Direct Debit and Bacs Direct Credit, showed that the retail and distribution sector is being hit the hardest across the UK, with almost 60% of those surveyed saying they were being paid late, with average outstanding payments of £43,000, totalling £12.3bn overdue for that sector alone.
Just last week the Northern Ireland Chamber of Commerce hosted a masterclass to help local businesses overcome the dangers of bad debt, warning that cashflow management can be associated with significant fall in business survival rates. The chamber, in association with Keys Commercial Finance and Trade Credit Brokers Ltd hosted the event for over 75 businesses after a report from the last quarter of 2012 revealed that almost two in every five businesses here do not have a system in place to protect their business from bad debt.
Ann McGregor chief executive of the Northern Ireland Chamber of Commerce said that cashflow has been a problem for many businesses since 2008, when the downturn led to many firms being unable to access working capital.
"Government must help educate businesses on how to manage late payment and bad debt. Measures such as a kitemark for prompt payers, alongside moves to encourage local government to use e-invoicing, could mean fewer businesses struggling with cashflow problems."
Judith Totten, managing director of Keys Commercial Finance Limited added that debt turn in NI has deteriorated by 38 days in the last 12 months and over 80% of local businesses feel that they are potentially only one bad debt away from their own failing.
Nigel Smyth, director of employers' body, CBI Northern Ireland, said that good relationships between purchasers and their suppliers are critical to growth and jobs, especially in smaller and medium-sized firms.
"Smaller companies need to ensure that managing trade credit is a priority within their business – this is particularly true in difficult economic times when there are greater risks and uncertainties.
"Companies need to develop better relationships with customers, have clear payment policies in place and have well trained staff to manage trade credit and deal with the challenges which late payment can create."