A new report has highlighted the devastating impact of late payments on Britain’s small businesses.
According to the Federation of Small Businesses (FSB), 50,000 small-company failures a year (at a cost to the economy of £2.5 billion) could be avoided if customers settled invoices on time. The FSB’s report, “Time to Act: The economic impact of poor payment practice”, has examined the wider implications of late payments on the UK economy. It warns that Britain is at risk of developing a business culture in which it is “acceptable not to pay SMEs on time”.
“Based on an imbalance of power between large companies and their small suppliers, this now has a chilling effect right across the economy,” said FSB national chairman Mike Cherry. “It’s distressing to hear from our members that in 2016 the average value of each late payment now stands at £6,142.”
The report also found that 37% of companies had run into cashflow difficulties as a result of overdue payments, while 30% had been forced to use an overdraft to tide them over. A fifth of the businesses questioned said late payments were a drain on company profit levels.
Tackling ‘supply chain bullying’
The FSB is calling on the Government to put more emphasis on the larger companies’ responsibilities to their supply chains in the current reforms of corporate governance rules. The organisation also wants the existing Prompt Payment Code to be toughened up, and it says that the new Small Business Commissioner should be given greater powers to “tackle supply chain bullying”.
In a separate report, Close Brothers Invoice Finance has just revealed figures that show 17% of small and medium-sized enterprises (SMEs) say late payments seriously affect their ability to trade, while 60% of firms complain that they spend at least a day every month chasing outstanding invoices.
“SMEs need better statutory protection and an independent champion prepared to take action on their behalf,” said Close Brothers’ David Thomson. “Many SMEs feel very uncomfortable challenging larger businesses, on which they may be reliant for substantial amounts of business, over late payments: this is where regulatory action is essential.”
If you’re suffering a similar burden of overdue invoices, don’t let matters lie.
Contact our experts at Crunch Collections today to find out we can help you get the money you’re owed.