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Released 27/08/2008

Northern SMEs better at weathering economic storm

More than half (58%) of all small-to-medium sized enterprises (SMEs) in Great Britain say their business has already been affected by the much-publicised economic downturn, according to research revealed today by Bacs Payment Schemes Limited (Bacs).

However, Northern-based businesses appear to be bucking the national trend and fairing better than their counterparts in the rest of the country. When questioned in June as part of Bacs' regular omnibus into the habits of British companies, almost half (45%) of SMEs in the North of Great Britain said they had experienced no visible indicators of the economic slow down that has been so widely reported.

Of the British companies that do say they're seeing the effects of a pinch, 37% of SME owners claimed projects were taking longer to come to fruition and reported that they had cut spending on things like business travel.

Almost a third of SMEs (30%) polled confirmed the late payments problem is being exacerbated, with payments overdue coming in even later, indicating that cash flow has become more difficult to manage as the financial climate has tightened in recent months. As a result, over a quarter (28%) said they are now spending more time than ever chasing late payments.

The main late payment culprits? At a national level, apparently other small businesses and ‘one-man-bands' are the worst offenders with 44% of respondents blaming individuals and 41% pointing the finger at SMEs. In comparison, just 34% per cent lay blame at the door of large corporates.

Michael Chambers, MD of Bacs, says: "With new stories breaking every day about the state of the economy, we wanted to ask the people at the coal face to find out exactly what SMEs in Great Britain are currently experiencing. Unfortunately, the overall results do seem to mirror what's being reported more widely. However, it's good to see that companies in the North of England and Scotland report that they seem to be weathering the initial storm better."

He continues: "We've always known that the issue of late payments has been a challenging one for small businesses in this country. To help small businesses address the issue, Bacs has developed a few handy hints and tips which may help limit the impact of late payments on their business - of which one of the most crucial is to credit check all customers before agreeing payment terms.

"Smaller organisations will be aware of the implications of late payments and therefore need to do everything in their power to keep to agreed payment terms. Automated payment methods like Bacs Direct Credit can help with this and, from a credit perspective, Direct Debit can also help organisations ensure that payments are made on time, every time."

To help SMEs in Great Britain through the downturn, Bacs has come up with some payment hints and tips to encourage punctual payment.

1) Encourage all trading partners to pay invoices by Bacs Direct Credit. Include your sort code and account number on invoices along with the message "Pay Me Direct." This small step can save time on payment reconciliation and queuing at the bank to pay in a cheque which in turn can have a positive effect on cash flow.

2) Late payment legislation has been in place for over ten years so why not use it? You are legally entitled to add statutory interest to overdue invoices and can also claim reasonable debt recovery costs if it gets to that stage.

3) Save your own suppliers time and money by paying them using Bacs Direct Credit. Once you have a reputation for paying late, your suppliers may not be so keen to work with you next time around.

4) Arrange to pay your regular business bills by Direct Debit. This way you'll know that the payment is being made each month, reducing the risk of incurring your own late payment charges.

5) If you have prompt payers, why not reward them so they continue exercising good practice? Consider offering early payers discounts encouraging them to keep the money flowing in.

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