Are Disputes The Main Cause Of Late Payments For SME’s?

SMEs, or small and medium-sized enterprises, represent the majority of the businesses around the UK and in the EU as a whole. Many believe that SMEs are the heart of the UK’s business industry, and it’s easy to see why. According to EU laws and regulations, a company is considered a small or medium-sized enterprise as long as they employ less than 250 employees, and they have an annual turnover that is less than 50 million euros. Shockingly enough, SMEs make up approximately 99% of the businesses that are currently operating in the UK; millions of people work for small or medium-sized companies. They are the backbone of the UK’s economy. But there is one particular issue that harms all SMEs – and that is late payments.

What Is the Impact of a Late Payment?

When a small or medium-sized enterprise experiences a late payment, and the party responsible for the late payment is being uncooperative or isn’t responding quickly, then a dispute may be opened. Late payments are a huge problem in the UK, with around one in four businesses being affected by parties that aren’t paying on time.

According to research that was completed by Bacs, SMEs typically collect late payments that are estimated to total to about £6.7 billion. 78% of Small to medium-sized are waiting around a month to be paid after making a late payment agreement with the other involved party. The time waiting for late payments causes a serious disruption to the business, itself.

The most serious outcome of late payments can be business death, which is a real thing that happens to businesses when their income is affected so much that they can’t continue running. For a small business, balancing finances is extremely important. Late payments are one of the causes of business death, and in fact, the FSB claimed that 50,000 businesses could have been saved in just one year if payments had been on time.

Why Do Disputes Cause Late Payments?

The disputes that are involved in late payments aren’t the sole cause of the late payment, itself. Because ultimately, if the party that owes money has received an invoice for services and decides not to pay it or realises that they can’t afford to pay it, then the problem lies with that party. There shouldn’t be a dispute where the party and the business need to come to payment terms and agreements, but sometimes it’s unavoidable. The late paying party may have several reasons for not being able to meet a payment deadline. One major reason for late payments is late payments. Imagine a situation where a company has realised that a payment is late from one of their clients, but the client is also in the middle of a late payment situation. It only takes one person or company in a chain of payments to be late with their invoice, and it affects every other business involved in that supply chain. It seems like an unlikely situation, but that is the reality of what happens when payments are late.

At Debtcol we believe in resolving disputes as quickly and amicably as possible, which means staying out of the court system whenever possible. If you have a commercial dispute that is stopping you from being paid and would like our help, please just get in touch to arrange your free consultation.