Small firms are being strangled by late payments, as three out of five suffer cash flow problems at the hands of their customers, according to new research. Nearly 2.4 million of the UK’s 3.95 million small businesses have suffered hits to their net earnings due to customer late payments, a study by Bank of Scotland Business Banking reveals. Of this 60%, some 670,000 have taken legal action within the last five years to get their customers to pay. While most resorted to small claims, county or high courts, the study shows that 14% were forced to employ a debt collector. “Maintaining business liquidity can be a difficult balancing act for many small businesses and a feat which is not helped when late payment tips the cash flow scales,” said Kevin Gillett, head of Bank of Scotland Business Banking. “The fact that so many are being forced to take legal action shows just how serious this matter is for business survival.” On average, small businesses wait 42 days before their bills are paid. Almost half, however, admitted they have waited up to a year for at least one payment. A further 2% said they regularly wait over 90 days to be paid.

Gillett said that businesses can help themselves by checking a new customer’s credit history, chasing up payments as soon as the first payment becomes overdue and by charging interest on overdue payments as a last resort.