Late payments have significantly increased over the past six months for many UK businesses, according to a survey by Hilton-Baird Collection Services. Two-thirds of respondents reported an increase in the time it takes customers to pay invoices, with businesses now waiting an average of 22 days beyond agreed terms. This is placing pressure on cash flows and forcing many businesses to pay their own suppliers later. While suspending customer credit and credit checking are common strategies, nearly a quarter of businesses aren't taking additional measures to manage credit risk.

1. Hilton-Baird’s Late Payment Survey
July 2011
in conjunction with Credit Today
© 2011 Hilton-Baird Collection Services Limited

2. Introduction
“LATE payment has arguably been the greatest “In addition to looking at any perceived shift in the
bugbear of the UK economy in post-recessionary regularity with which customers are failing to pay on
Britain, significantly restricting the growth potential time, the study also assesses how long the average
of businesses of all sizes who are commonly having business must wait beyond terms to be paid in full.
to wait beyond agreed credit terms to be paid by
their customers. “We also look at what the biggest repercussions
have been on businesses struggling with late
“Understandably, this is placing a great strain on the payment, whilst additionally asking respondents to
cash flows of businesses of all sizes who are having specify what measures they are taking to protect
to invest a great deal of time and resource into their business against this issue.
chasing these invoices, something that Hilton-Baird
Collection Services has seen first hand in its role as a “I hope that you find this report of interest and we
commercial debt collection agency servicing the SME would welcome any feedback you may have on any
and corporate markets. of the topics raised.
“Conducted in July, our second Late Payment Survey “Thank you to all those who took the time to partake
in conjunction with Credit Today therefore provided in this survey.”
the opportunity to gauge how this issue has evolved
over the past six months, whilst further providing
insight into how UK firms have been coping with the Alex Hilton-Baird, Managing Director
challenges. Hilton-Baird Collection Services
© 2011 Hilton-Baird Collection Services Limited 2

3. Background to research
HILTON-BAIRD Collection Services’ research was
undertaken among 436 businesses across a wide
variety of business sectors, in order to provide a
representative sample of the UK’s SMEs.
The research was conducted throughout July 2011,
with the results demonstrating the considerable
pressures that business owners and finance directors
are currently facing with regard to late payment.
© 2011 Hilton-Baird Collection Services Limited 3

4. Key findings
TWO-THIRDS of our survey’s respondents have that owners must spend more time chasing invoices,
reported an increase in the time it took their as reported by 84%, with 63% paying their suppliers
customers to pay their invoices during the six later to preserve their own cash flow.
months to July (67%), with only 5% reporting a fall.
Despite all of these challenges, just 50% credit check
As a result, businesses are having to wait an average new customers with the suspension of customer
of 22 days beyond agreed credit terms to be paid in credit facilities being the most popular credit
full, with 18% now classifying more than 20% of management strategy (53%). Two in five have also
their debtor book as more than 90 days old. enlisted the help of a Small Claims Court / County
Court Judgements (41%), with only 27% charging
Privately owned / limited companies were identified interest on late payments.
as the worst offenders (by 43%), followed by
corporates / listed companies (23%). Meanwhile, just 17% of respondents have
outsourced all or part of their credit control function
One in three said the most common excuse for late to a specialist debt collection agency – with those
payment was that they were waiting for payment by that did citing the facilitation of the collection of
their own customers, with a further 28% most overdue debts as the primary benefit (54%).
commonly told that their customers are waiting for
payment authorisation. Most worrying of all, however, is that 24% aren’t
considering employing any additional credit
The biggest impact on respondents’ businesses is management strategies in the next six months.
© 2011 Hilton-Baird Collection Services Limited 4

5. Delay in payment
DESPITE the average business offering credit terms Only 13% of the total respondents were able to
of 30 days, their customers took an average of 52 report no delay in the time it takes their customers
days to pay their invoices in full during the six to pay, with 2% forced to wait more than 60 days
months to July. beyond terms for payment.
The result is that UK SMEs are having to wait an
average of 22 days beyond agreed credit terms to be
paid by their customers.
Overall payment terms and actual payment (mean)
Terms Payment
OVERALL PAYMENT GAP
Total (388) 30 52
22 DAYS
0 10 20 30 40 50 60 70 80 90 100
Base: 388 (all)
© 2011 Hilton-Baird Collection Services Limited 5

6. Payment punctuality
MORE than two-thirds of respondents reported a Interestingly, 80% of construction firms reported an
rise in the time it took their customers to pay increase, with 13% of businesses turning over more
invoices during the six months to July (67%). than £3 million reporting a decrease.
Conversely, only 5% experienced a fall, with 28%
registering no change.
In the last 6 months, the time it took for your customers to pay your invoices has ... (%)
Increased Remained the same Decreased
Total (382) 67 28 5
0 10 20 30 40 50 60 70 80 90 100
Base: 382 (all)
© 2011 Hilton-Baird Collection Services Limited 6

7. Late payment impact
PREDICTABLY, the biggest impact of late payment on However, 63% also admitted to paying suppliers later
businesses is that they have to spend more time as a result, creating an unsustainable cycle that
chasing customers for payment (84%). could continue for some time to come.
Late payments: Impact on the business (%)
Spend more time chasing invoices 84
Pay your suppliers later 63
Increase borrowing (including credit… 39
Pay HM Revenue & Customs later 34
Turn away new business 11
Employ an external provider of credit… 7
Employ more credit control staff 6
Other 6
No effect on the business 4
0 10 20 30 40 50 60 70 80 90 100
Base: 246 (all who had seen an increase in the time it takes their customers to pay invoices)
© 2011 Hilton-Baird Collection Services Limited 7

8. Late payment excuses
THE most common excuse for late payment over A further 28% stated that the most common excuse
the six months to July, as reported by our they had come across in that time was that they
sample, was that customers were waiting to be paid were waiting for payment authorisation by a more
by their own customers (33%). senior person in the business.
Most common reason given for late payments (%)
Waiting to be paid by their customers 33
Waiting for payment authorisation 28
Copy invoice required 11
Can't afford to pay 7
Invoice disputed 4
Forgot to pay 4
Sales did not notify Accounts of invoice 3
Cheque in the post 2
Their terms take precedent 2
Other 3
Customers always pay on time 1
0 10 20 30 40 50 60 70 80 90 100
Base: 360 (all)
© 2011 Hilton-Baird Collection Services Limited 8

9. Credit management strategies
SUSPENDING customer credit facilities was the Exactly half credit check new customers, whilst 41%
most common credit management strategy have used Small Claims Courts or County Court
amongst our respondents during the six months to Judgments. Just 27% charge late payment interest on
July, used by 53%. overdue invoices.
Credit management strategies used currently (%)
Suspending customer credit facilities 53
New customer credit checks 50
Small Claims Court / County Court Judgments 41
Visiting debtors in person 32
Regular existing customer credit checks 30
Interest on late payments / Fixed late payment… 27
Written credit policy 24
Factoring 13
Goods repossession 10
Credit protecton insurance 6
Constant reminding 3
Suspending work / services 1
Writing to debtors, including solicitor involvement 1
Other 2
None 10
Base: 340 (all) 0 10 20 30 40 50 60 70 80 90 100
© 2011 Hilton-Baird Collection Services Limited 9

10. About Hilton-Baird Collection Services
BELONGING to the Hilton-Baird Group, Hilton-Baird lie, working round the clock to ensure we can best
Collection Services is the UK’s leading commercial surpass all expectations in all of our debt recovery
debt collection agency that serves the UK’s activity.
banks, independent lenders and SME and corporate
markets. Memberships and affiliations to the Credit Services
Association and R3 (the Association of Business
Established in 2001, we pride ourselves on providing Recovery Professionals) ensures that we maintain
an efficient, professional and trustworthy resource the highest standards throughout the collections
that is ultimately successful, as demonstrated by our process and endeavour to provide a friendly and
success-only pricing policy. enterprising service at all times.
Our services to the SME and corporate marketplace To find out more about Hilton-Baird Collection
range from one-off debt recovery to ongoing credit Services, visit www.hiltonbaird.co.uk/cs.
control support that’s tailored to each businesses’
individual requirements, working closely with both Alternatively, please call 02380 707392 or email
clients and their customers in order to bring the collections@hiltonbaird.co.uk to speak to our team
right conclusion to often difficult circumstances. today.
With an experienced, highly skilled and multilingual
team, we can assist with our clients’ debt collection
requirements no matter which country their debtors
© 2011 Hilton-Baird Collection Services Limited 10

11. Contact details
Hilton-Baird Collection Services
Ashwood House
Ashwood Gardens
Southampton
SO16 7LF
Tel: +44 (0)23 8070 7392
Fax: +44 (0)23 8070 7393
Email: collections@hiltonbaird.co.uk
Website: www.hiltonbaird.co.uk/cs
© 2011 Hilton-Baird Collection Services Limited 11