More than one fifth of small and medium sized businesses have declined future business from customers in the last year in an attempt to tackle late payments. According to research by Barclays, UK SMEs are currently owed more than £36 billion in late payments, causing serious cash flow problems.

Late payments continue to be a critical problem for the nation’s small and medium businesses with 85 per cent of SMEs having experienced these over the last two years. Nearly half of these businesses claim their worst repeat offenders pay late three times a year or more.

The Barclays research, carried out amongst over 1,100 senior decision makers in SMEs in Britain, reveals that in the past year more than one fifth have declined to do future business with customers who have paid late in the past.

Sue Hayes, managing director of Barclays Business banking, said: “With one in five businesses that cease trading citing bad debt as the reason, it is vital that SMEs tackle this problem and take action before it is too late.”

The research also reveals that the impact of late payments on decision makers is often significant with nearly one third of respondents, who have experienced late payments in the past two years, having to use personal money or assets to boost their cash flow. One fifth of respondents have suffered extreme stress as a result, and in some cases (11 per cent) late payments have nearly caused a business to fail.

Sue Hayes continued: “Faced with a continually challenging business environment, small businesses clearly have no other option than to take action against customers who repeatedly pay late. Whilst it goes against all natural business instincts to turn customers away, it is entirely understandable when weighed up against the overall impact of the late payment on the future of the business.”