Late payment is a growing issue for UK businesses, but one in three paid late in the past year did not chase outstanding payments, according to research from Lloyds Bank Commercial Banking.

The Lloyds Bank Business Barometer, based on responses from more than 1,200 UK companies, found that 52% have experienced late payment in the past year, while 38% reported overdue invoice payments on multiple occasions.

The UK’s small businesses are owed an average of £79,500 (US$99,680) in outstanding invoices, with 9% owed more than £200,000.

Fear of damaging valuable customer relationships was the biggest reason for inaction on pursuing late payments, cited by 62% of businesses. Capacity and time constraints  was a distant second, at 27%.

An overview of the UK business community in its entirety shows 7% are owed more than £200,000 in unpaid invoices, while for businesses with annual turnover of more than £25 million the average amount of outstanding invoices is £160,000.

London-based businesses London are owed £98,000 on average in outstanding invoices, the highest of any UK region, followed by the West Midlands (£66,000) and the South West (£64,000).

Taking action

Ben Stephenson, managing director for invoice finance and asset-based lending, global transaction banking at Lloyds Bank Commercial Banking, comments: “Late – as opposed to just slow – payments are doubly difficult for businesses to manage.

“Not only does having cash tied up in outstanding invoices damage productivity and put pressure on cash flow, limiting firms’ ability to fund growth; it also robs firms of the certainty they need to plan ahead.”

Among those businesses were paid late in the past year and took proactive steps to recover payment, the most popular approaches to pursuing offenders were email and phone reminders (74% and 64% respectively), while 24% resorted to tougher measures by taking legal action and 22% applied interest or charges on an overdue invoice.

Only 5% of firms that chased late payments in the last year complained to a government agency while 49% admitted that they were unaware of government measures to support them in tackling late payments.

“With a lack of awareness about the options available to mitigate the impact of late payments leaving some businesses under more pressure than they need to be, it’s absolutely imperative that firms are better clued up on options,” says Stephenson. “These include government support and invoice financing.

“Indeed, funding options like invoice financing can enable businesses to access the money they are owed, typically within 24 hours, accelerating growth and productivity improvements.”