Late payments to small firms rise by 40 per cent
Small firms are being urged to tighten their payment terms after new research showed that overdue payments to small businesses increased by almost 40 % in 2008.
According to the survey of more than 450 firms by payment scheme Bacs, 58 % of small businesses were owed money that was overdue in 2008 – a jump from 51 % in 2007. On average, each UK business was owed £38,000 in overdue payments.
“Late payments could well be a major factor in the success or failure of these businesses in the year ahead,”
said Bacs managing director, Michael Chambers
“Small businesses are currently disappearing at a rate of 86 every day.
“Action must be taken to address this crushing payment issue, but businesses also have to take responsibility for helping themselves where they can,” he added. “For instance, while the Government has brought in a system of paying public sector invoices within ten days, three-quarters of British SMEs haven’t replicated that and still offer lengthier payment terms.”
Forum of Private Business spokesman, Phil McCabe, said that late payments had intensified as a direct result of the downturn.
“The amount of money owed to small firms has soared over the past year as big businesses seek to create credit lines for themselves by squeezing their suppliers,” he said.
“In addition, despite the Government’s pledge to pay its suppliers within ten days, public organisations continue to be among the worst culprits,” added McCabe. “With the knowledge that prompt payment can mean the difference between trading profitably and trading at all, many small businesses are now looking to the year ahead with considerable trepidation.”
For more information read about late payment legislation.