Business Groups Call for Government Intervention on Late Payments
Almost a fifth of small firms have come close to going out of business due to cashflow problems arising from late payment, research by credit management firm Graydon has highlighted.
The survey of 500 small businesses between March and April this year, conducted in partnership with the Forum of Private Business (FPB), revealed that 51% had their trading affected by late payment, while 23% admitted the issue was a serious problem for them.
Customers extending their payment terms without notice or consultation were blamed by 65% of business owners, while a quarter reported that customers had withdrawn final payment without notice as a means of checking work quality.
The poll also highlighted the ‘domino’ effect of late payment down the supply chain. Of the 59% of respondents who said they paid their suppliers late, the vast majority pinpointed late payment from their own customers as the reason.
However, the findings indicated that many small firms were not doing enough to tackle late payment themselves. Less than half used formal credit control procedures, such as credit checks, while those that did were significantly less likely to suffer from late payment problems, according to the report.
Phil Orford, chief executive of the FPB, said:
“Late payment decimates cashflow, kills growth and innovation and ultimately forces businesses to the wall.”
The lobby group said payment performance to subcontractors should be an important consideration when government contracts are awarded to large firms.
The FPB has put forward the report’s findings to the Government, which has said it is determined to work with businesses to stamp out the problem.
“We need practical, business-focused solutions to help SMEs in particular and make sure they are paid promptly. Legislation alone cannot do enough to enforce prompt payment of suppliers,”
said Business Minister Mark Prisk.
For further reading on any of these subjects take a look at the following business advice articles:
Late Payment of Invoices (2002)
A User’s Guide to late payment legislation – The Late Payment of Commercial Debts (Interest) Act 1998, as amended and supplemented by the Late Payment of Commercial Debts Regulations 2002…
Cash is the oxygen that enables a small business to survive and prosper, and is the primary indicator of business health…