ISME Calls on Irish Government to Tackle Late Payments

The Irish Small and Medium Enterprises Association (ISME) has called on the new government to put late payments in commercial transactions at the top of its priorities in its first 100-day commitments. The ISME Credit Watch Survey for spring 2011 clearly shows that smaller enterprises are being placed under severe pressure by deliberately delayed payments. Despite persistent warnings from the association, the previous government refused to tackle this issue, due to pressure from big business and state agencies, the main culprits in delayed payments.

According to ISME chief executive officer (CEO) Mark Fielding: “Late payments have always been a problem for small businesses and this has intensified as state bodies and accountancy led big business take longer and longer to pay. When smaller businesses are not being paid on time, they cannot in turn pay their suppliers and the vicious domino effect ends with the smallest and most vulnerable being forced to close down, with the resultant job losses.”

The main findings from 770 respondents in the ISME Credit Watch Survey are:

• Actual average payment period in Ireland for SMEs is 73 days, a slight deterioration from 72 days in the winter 2010 survey.
• Forty-four percent are experiencing delays of three months or more.
• Both big business and state agencies continue to take longer credit.
• Construction firms are waiting 87 days, while wholesale is shortest at 61 days.
• Credit taken in Ulster counties is shortest, while Munster & Connaught businesses wait 76 days on average.

While the main government departments have improved their payments, the real offenders are the state agencies and big business, where delays have increased dramatically in the last year with smaller business left with ‘take it or leave it’ option.

“With the deterioration in late payments across the board, cash flow in the entire SME sector is drying up and this, coupled with the lack of available, affordable credit from the banks, is putting many small businesses at risk, with the resulting threat of closures and job losses. The ridiculous Prompt Payment Act has had the exact opposite effect on payments to what was intended, in allowing powerful large customers to abuse their dominant position by opting out of the law and dictate unreasonable credit terms to their smaller suppliers,” continued Fielding.

ISME recommends the following steps:

• Amend the current legislation, which allows business to opt out of the law.
• Introduce a mandatory payments period on all national transactions, initially 60 days and:

1. Over a period of two years, reduce that to 30 days across the board.
2. Include all state agencies and local authorities in the 15-day rule for payment.
3. Publish payment metrics for all state departments, agencies and local authorities annually.

“For far too long this issue has been ignored by previous administrations and prompt action would now clearly demonstrate the new government’s willingness to tackle the problem and assist small business, a sector that has contributed so much to the development of the economy,” concluded Fielding.

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