Late payment spike wounds SMEs

A rise in late payments is hitting small channel businesses hard, research from the Forum of Private Business (FPB) has suggested.

Nearly nine out of ten (88 per cent) small firms questioned by the FPB said their larger customers are not paying them within the agreed time period and 72 per cent believe this is having a ‘serious’ or ‘very serious’ impact on their business.

One in three respondents said they are owed between £1,001 and £5,000, which they claim is having an effect on their cash flow.

More than half (56 per cent) felt that late payments have become worse over the past year, while 94 per cent called on the government to set an example by paying its own suppliers on time.

Nick Palin, finance and administration director, said: “Late payment is on the rise, according to our research, with more than half of respondents saying it has become more of a problem over the last 12 months.

“The government should be doing more, both by paying on time itself and by implementing measures to tackle the problem without increasing the burden of legislation faced by small firms.”

The FPB claimed it is working with the government to find non-legislative solutions to payment problems.

Small firms already have a statutory right to interest (SRI) under the Late Payment of Commercial Debts (Interest) Act 1998, which allows them to charge interest on the debt they are owed.

Palin added: “The research shows that worrying trends are emerging. Supplier abuse appears to be widespread, and many smaller firms are in a catch-22 situation, fearing that, if they take action and use the legislation to charge interest, these larger companies will simply refuse to deal with them again.”

Some 72 per cent of the FPB’s members surveyed said that the standard payment period set out in their contracts is 30 days, which the FPB deemed an acceptable amount of time.