£4,619 is the average debt small firms are chasing in UK courts (2024)

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Small businesses are increasingly resorting to the law to chase bad debt, according to new research.

The number of county court judgments brought by small and medium-sized enterprises increased by 23 per cent from the first half of 2015 to the second.

The study by Ormsby Street of data from its 27,000-strong customer base found the average value of CCJs pursued by SMEs was £4,619.

Ormsby Street, which provides CreditHQ, a credit rating platform for business, charges £15 a month for access to its software to check the credit status, payment performance and financial health of a customer or partner.

Its managing director, Martin Campbell, said: ‘Almost £5,000 is a significant amount for any small business to have to go to court to chase and it is hugely unfair that a small business should have to spend its precious time and resources on chasing payment for work that has already been delivered.’

He added: ‘Late invoice payment is fast becoming the scourge of small business in the UK, causing cash-flow issues that can impact growth and even the very existence of a business.’

Meanwhile, research from invoice finance specialist Bibby Financial Services has found that 14 per cent of UK SMEs see late payments as their biggest challenge.

Almost half (47 per cent) wait more than 30 days for payment from customers, with the average waiting time 40.23 days.

Larger SMEs are significantly more exposed to the chronic issue of late payments. Of those with turnovers of between £1million and £5million, 65 per cent wait more than 30 days for payment.

Overall, 67 per cent of SMEs with turnovers of more than £5million experience late payments. This compares with the national average of 47 per cent.

Last week, it was revealed that concrete maker Aggregate Industries had been at the centre of a row with the Forum of Private Business (FPB) over claims that it took more than 90 days to settle some of its bills.

Aggregate Industries told the business group: ‘We do not take kindly to implicit threats from organisations such as your own.’

This time last year, Tesco was facing accusations that it was continuing to squeeze small businesses after emailing suppliers demanding price cuts. The Groceries Code Adjudicator has now declared Tesco ‘knowingly delayed paying money to suppliers in order to improve its own financial position’.

FPB research projects manager Thomas Parry said he was noticing an increasing intolerance over large companies paying late. He said: ‘We found that with the last two firms that we put in our Hall of Shame – Aggregate Industries and Holland & Barrett, which we’re putting in on Monday – people are not prepared to tolerate it any more.’

He also said an increase in the number of firms speaking out against poor payment practices suggests that the Government’s proposed Small Business Commissioner could be effective as they are likely to approach it for help.

He added: ‘There are one or two cases not in our Hall of Shame where we’ve seen people take a stand and they say: “OK I’m going to come out and the relationship with X or Y is now ruined, but you know what, I’m better as a result of it.”

‘We’re about to see a big increase in the cost of doing business with the National Living Wage, so people are really having to focus on making sure that they get paid on time.’

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