Despite an increasing volume of positive economic news from the Government and business bodies alike, it seems the UK’s financial recovery is far from secure – for SMEs at least. The Forum of Private Business, which lobbies on behalf of small businesses, has surveyed its 18,000 members and found that the UK’s smallest firms have seen a sharp increase in the frequency of late payments.
Amongst those surveyed by the FPB, slightly less than a quarter (23%) saw an increase in late payments over the last year – compared with just 3% who have experienced a decrease. Not only is the frequency of late payments on the up, the length of time they take to settle appears to be increasing too – 29% of respondents said the number of overdue days before a payment is settled has gone up. Only 8% experienced speedier payments in the last twelve months.
Perhaps unsurprisingly, then, 39% of FPB members have called for prompt payments in business-to-business transactions to be more widely promoted, and a similar number (36%) would like to see repeat offenders barred from bidding for Government contracts.
The FPB’s Chief Executive, Phil Orford, said:
“Improving cashflow is the likely cause for late payment issues remaining static, despite lengthening payment terms. However, upwards of £30 billion remains tied up in late payments, costing a typical small business 130 hours a year to chase and meaning that a third are forced to seek external finance to cover the gaps in cash.
“It is essential that Government uses the recommendations to introduce effective measures and accepts that it not only has a responsibility to play in this area but also that its increased action can also act as an important catalyst for better payment practices.”
Aside from introducing the voluntary Prompt Payment Code, the Government has been slow to act on the continuing problem of late payments to small businesses. A recent study found that overdue invoices were a factor in as many as 20% of business insolvencies.
Photo by Ian Barbour