Small Businesses: Stand Up and Be Counted on Late Payment

Leading organisations probe cash flow management in support of new government prompt payment drive

To coincide with a government drive to help business owners get paid on time, Forum of Private Business and Graydon UK Ltd, a commercial credit reference agency, are to research small firms’ attitudes to managing invoice payments and cashflow management.

Launched yesterdday, the Government’s initiative involves a co-ordinated set of announcements offering information, guidance and support to aid businesses struggling with late payment, which is an increasing problem that decimates small businesses’ cash flow.

According to a recent Graydon UK survey 51% of businesses reported that late payment has become worse during the past year, with 45% believing it could threaten business investments and 20% that it could even threaten their ability to continue trading in 2012.

The latest survey, the results of which will be published in March, asks small business owners what cash flow management methods they believe are most effective – including being able to charge interest on outstanding invoices via the Late Payment of Commercial Debts (Interest) Act 1998, legislation the Forum was instrumental in lobbying for but which is often criticised as under-used.

The survey also asks SMEs to rate the value of giving customers prompt payment incentives, investing in credit management software and personal contact with their customers’ payroll departments, as well as using invoice finance.

In addition to asking business owners about the frequency and impact of late payment, and changes to payment terms and conditions with no real consultation, the Forum and Graydon UK are asking them to impart any reasons they pay their own suppliers late -and about the benefits of paying on time.

“Late payment has long been the scourge of small firms, decimating cash flow, preventing growth and threatening their very survival – but there are steps business owners can take to minimise the problem,”

said Phil Orford, the Forum’s Chief Executive.

“Often the problem is that they are not aware of how to implement a few practical measures that can make a big difference.”

“That is why the Government’s current drive is so important and, by gauging our members’ views about cash flow management procedures and barriers to implementing them, we hope to provide the key information necessary to push the prompt payment agenda forward even further.”

“It is all about providing the information, guidance and support to empower business owners to help themselves get paid on time.”

Gordon Skaljak, External Spokesperson, Graydon UK, said:

“Businesses can only transact with confidence if they truly understand the markets they’re operating in.”

“Identifying risks to cash flow triggered by the late payment of trade invoices is a key component of this. We actively champion the interests of businesses of all sizes in relation to managing credit risk and are committed to working with our industry partners to give these companies a voice, as well as information and guidance.”

“This is why we’re backing the BIS initiative to get businesses paid on time. With our own research showing that 20 per cent of UK credit managers believe late payment could be a threat to their firm’s ability to continue trading in 2012, this is not an issue which the business community can afford to gloss over as we all seek to get Britain trading.”

Tackling late payment is a major component of the Forum’s headline Get Britain Trading campaign, which aims to recognise the huge contribution small firms make to the UK’s economy and the barriers to growth they face.

In December 2011 the Forum and Graydon UK were key members of a group of leading business organisations which wrote to the Business Minister, Mark Prisk MP, calling for a plan of action to address late payment. In addition to launching today’s initiative, which is part of the Government’s new ‘Finance Fitness’ campaign, the Minister has responded by suggesting a number of possible measures, including potentially reforming the Late Payment Working Group, which was disbanded several years ago.

In support of the Government’s prompt payment drive the Forum has produced a new practical guide called Get Paid! (571k PDF) with the ACCA (the Association of Chartered Certified Accountants), Experian and the Institute of Credit Management (ICM).

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