UK Businesses ‘Starting to Pay More Promptly’
The average time taken by UK businesses to pay bills improved by two days throughout 2012 to an average of 15 days late against agreed payment terms, according to commercial information group Dun & Bradstreet (D&B).
D&B’s report revealed that its analysis shows UK businesses have been steadily paying bills later in recent years, from 13 days late in 2006, peaking at 17 days in 2011. The results suggest many businesses have adapted to operating in today’s sluggish economy and are managing their cash flow more confidently.
The data highlights the potential impact of the recently updated EU Payments Directive (Directive 2011/7/EU) that sets the basis in law for suppliers to reduce risk and protect cash flow. This legislation makes it easier for businesses to pursue payment, with debtors being forced to incur interest and pay an administration fee if they fail to pay for goods and services within 60 days for business and 30 days for public authorities. Although it will help protect some businesses, D&B suggests that the updated Directive presents new risks for companies struggling to manage their finances and pay on time, due to the potential interest liability risk.
The average 15 days late payment times for UK businesses over the past year are similar to that of France, Spain and Italy. However, this is nine days slower than Germany, which has the shortest average payment period of the countries. The payment period in Portugal is seven days longer than the UK.
“Payment trends offer valuable insight into the trading performance of a business, and changes are one of the earliest signals of financial difficulty or potential failure,” said Corinne Saunders, president Dun and Bradstreet Europe & Worldwide Network.
“While we’re unlikely to see an increase in litigation as a result of the updated Payments Directive, it should encourage businesses to take a fresh look at their payment behaviour and that of their customers. It will also put pressure on large businesses in sectors where extended payment terms have been used as a means to protect margins, often putting smaller suppliers under increasing pressure.”
D&B suggests three key steps to help businesses manage payments effectively: