Late Payment Code Criticised as Toothless
Research shows that the majority of UK businesses are waiting for 90 days or more to be paid despite regulations to help protect them against late payment of invoices…
Data from business software and services vendor Sage reveals that as many as two thirds of the country’s businesses are having their invoices paid after 90 days or more.
And despite the Prompt Payment Code, set up in 2008, and the Late Payment of Invoices regulations, just 5% of the country’s SMEs see the code as being effective at all.
The code was deemed as ineffective by 38% of small and medium-sized businesses and a further 41% of firms said they’d not even heard of the code.
This has led businesses to brand the code and regulations as "toothless" and has even been branded a "systemic failure" of the government to tackle the issue of late payment.
Late payment has become such a problem for Britain’s businesses that last year over a fifth of firms said they would rather turn down business than have to deal with a late payer.
In the Sage survey 11% of businesses said they’d suffered major cashflow problems because of late payment, whilst 33% of those questioned had suffered only minor cashflow issues because of late invoices.
The knock-on effect of cashflow issues was that 14% of firms were then unable to pay their own suppliers, causing upset further down the supply chain.
In some cases, 2.4% of those business surveyed, the effect of late payment meant that firms were late in paying wages to their very own employees.
Speaking about the findings, Lee Perkins, Managing Director of Sage UK and Ireland’s Start-up and Small Business Division, said:
“It’s time for the Government to roll up its sleeves and get on with clamping down on the notorious late payers which are starving smaller firms of cashflow.”
“British businesses have given a damning verdict for the Prompt Payment Code which has proved toothless and ineffective. There has been plenty of rhetoric, but not enough action and firms are saying they are fed up.”
“Thirty days is long enough, but it’s absolutely criminal that the majority of firms experiencing late payments of sixty, or even ninety days.”
The worst offenders for paying their invoices late were big businesses, said 45% of those firms questioned. Just 16% of the late payments were down to small businesses with 13% of late invoices coming from the public sector and 8% from individuals.