The Problem of Late Payments has Escalated for Small Businesses
Small firms and micro-business are having to an average of 72 days for invoices to be paid – longer than during the recession
Late payment problems for micro-businesses (turnover of less than £1m) have escalated with invoices taking an average 72 days to be paid, despite the government’s recent proposals to end poor payment practices.
The study by the Asset Based Finance Association (ABFA) reveals that small business suppliers now wait approximately 11 days more to get paid than they did six years ago – during the recession.
In February, former business minister Matthew Hancock announced improvements to the Prompt Payment Code and plans to make 30 day payment terms a standard. The government has also launched a Small Business Conciliation Service aimed at resolving payment disputes for small and medium enterprises.
However, late payment delays for small businesses have increased by one day since last year, with many businesses struggling to implement effective growth strategies dues to the gaps in cashflow.
In stark contrast larger businesses (with turnover of over £500m) arewaiting47 days on average for payment; an improvement of one day from last year’s report.
Jeff Longhurst, Chief Executive of the ABFA, commented:
“It’s very worrying to see that the trend is going in the wrong direction for smaller businesses, in spite of what is a more benign business climate than we have seen for several years. The benefits of the recovery are not being felt equally.”
“Delays to payments put enormous pressure on small businesses’ cash flow – they have to meet overheads, tax bills and their own supplier invoices whether they’ve been paid or not. Smaller businesses are particularly vulnerable. No matter how successful they are, if just a few invoices aren’t paid on time, they could end up in serious financial trouble.”
Experiencing late payment issues? Check out our guide on how to use invoice finance to tackle cashflow problems.