Small Businesses Getting Paid 3 Weeks Later Than Larger Counterparts
Average wait time for small businesses to receive payment rises from 64 days in 2006 to 71 days in 2014
Companies with turnovers of less than £1m wait an average of 71 days to receive payment from customers, whereas businesses with a turnover of over £500m only wait 48 days.
Research by the Asset Based Finance Association (ABFA) revealed that although the government has put pressure on larger companies to sign on to the Prompt Payment Code, a voluntary register of companies committed to paying invoices in accordance with contracts; the number of days that small and mid-sized businesses wait to get paid has increased since the recession – rising from 64 days in 2006.
The ABFA believe that the increase in payment times is a result of larger businesses using their power over their small business suppliers.
Furthermore the rise in small and mid-sized businesses wait-time could be harmfully effecting growth potential as it weakens cashflow, making it more difficult for these companies to invest in new equipment or staff, as well as pay existing expenses.
Chief executive of the ABFA, Jeff Longhurst, discussed the findings and highlighted the importance of alternative finance options for businesses forced to wait:
“These figures highlight that the relationship between some big businesses and their smaller suppliers has become even more unbalanced since the credit crunch – and Government efforts to address this have not had a great deal of impact.
“It’s more important than ever that these businesses are aware of the options they have to get around the roadblock of late payment, and free up the funds they need more quickly.”