Smallest Businesses Pay on Time
Micro businesses are settling their bills more quickly than big firms, new research from credit agency Experian has highlighted.
Experian’s payment performance monitor of 6,000 businesses, found that late payment among UK firms of all sizes increased by almost a day on average during July, August and September this year.
But the UK’s smallest businesses – those with one or two employees – managed to limit their late payment of bills to just half a day, representing the lowest rise during the same period.
On average, firms were settling their invoices 26 days late in the third quarter compared to 25 days during April to June, the research found. Overall, the results indicated that most firms were struggling to pay the bills because of cashflow issues.
Experian spokesperson Serj Heera said that small businesses often found it easier than large firms to juggle their finances in order to settle bills:
“Small or micro firms are typically very resourceful when it comes to moving finance around to make things work. They are also likely to have fewer fixed overheads like rent, meaning they can be more flexible with their cash.”
“Late payment has increased across the board over the past few months, indicating that many businesses are finding it tough going at the moment. It’s a vicious circle – firms aren’t getting paid on time, which means they in turn can’t pay their suppliers either.”
The Forum of Private Businesses (FPB) said the issue of late payment was critical for UK small and medium-sized businesses as more than £24 billion in outstanding invoices with the average owed around £27,000.
FPB spokesman Phil McCabe said the Government should do more to tackle the problem.
“The jobs that will drive economic growth are expected to be created in micro businesses so making sure the smallest firms are paid on time and have the resources to grow is critical.”
The government-backed Prompt Payment Code, introduced two years ago to promote better payment of suppliers by businesses, “lacked teeth”, McCabe added because “in reality, very few large firms had signed up to [it]”.