With research showing UK businesses are owed £41.5bn in late payments, PACT Scheme is launching to lead the fight against late payments.
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.
Latest research from Bacs Payment Schemes (Bacs) shows that 59% 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 and companies with a turnover under £1m are now waiting an average of 72 days to receive payment from their invoices.
Nick Goodall, owner of Detail My Car said: ““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.”
Business owners can sign up with PACT Scheme and receive help if they have any outstanding payments. The scheme uses a three-step process to help businesses recover debts, starting with mediation via calls, emails etc. and then eventually, exposing the debtor online at www.defaulter.com. The non-payers information, including the details of the overdue payments, is exposed. The PACT Scheme can then, at the discretion of the client, choose to share the debtor’s payment performance with leading credit reference agencies.
Chris Hawthorn, managing director of PACT Scheme said: “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.
“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 that continue to refuse payment will be named and shamed on www.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.”
Pictured: Chris Hawthorn, managing director of PACT Scheme