Late Payments Still a Problem for UK SMEs
Nearly one in four of the UK’s small and medium-sized enterprises (SMEs) have suffered from late payments from customers over the past year, according to a survey by national small business group the Forum of Private Business (FPB).
The business support group said that despite positive news on the UK economy, the continuing culture of late payment remains a concern for many SMEs. In its latest banking and finance survey, 23% of FPB members reported an increase in late payment over the past year compared with just 3% who reported a decrease.
Twenty-nine per cent have also seen an increase in the average number of days beyond the deadline that a payment is made late, while 8% reported a decrease, and 19% have seen an increase in both elements of late payment.
The FPB said that while the improving economic situation means the number of businesses seeing late payment as a serious problem has remained static, small businesses are still keen to see more measures to tackle the issue.
Thirty-nine per cent of businesses surveyed would like to see prompt payment better promoted, 37% would prefer to pay value added tax (VAT) on money that has entered their account rather than when an invoice is submitted and 36% wanted to see persistent late payers barred from government contacts.
“Improving cash flow is the likely cause for late payment issues remaining static, despite lengthening payment terms,” said Phil Orford, the FPB’s chief executive officer (CEO). “However, upwards of £30bn 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.”
The UK government is mulling over responses to a recent late payment discussion paper, which offered suggestions for tackling the issue in a more robust manner, including the reintroduction of compulsory reporting of company payment terms and practices, and annual checks for signatories to the UK’s prompt payment code.
“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,” said Orford.