Small and medium-sized enterprises (SMEs) in the UK are experiencing cash flow problems due to a rising amount of late payments, according to new research.

HSBC finds that although 89 per cent of all SMEs allow customers to pay within 40 days, just over half of them (51 per cent) are actually receiving the money owed to them during this period.

Government legislation has allowed SMEs to help speed up the process by charging interest on late payments but it seems to be having little effect, with only four per cent of SMEs saying that they charged interest on outstanding debt.

Simon Wainwright, head of business banking at HSBC, says: "Legislation alone is not the answer to the problem. We find that late payment is often caused by poor processes and procedures, rather than unwillingness to repay."

He recommends that companies have good credit management procedures in place. These include: checking if customers have a poor credit rating, making sure contracts are clear, finding out who is responsible for paying the invoice and filing client correspondence systematically.



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