Small firms report late payment is still an issue and it's the private sector that's the worst offender
Almost three quarters (73%) of businesses have been paid late in the last 12 months, according to a new paper by the Federation of Small Businesses (FSB) and for the majority (77%), it is by other businesses.
Small firms do not have the same cash-flow buffers as larger businesses and so being paid late causes a vicious circle, meaning that 38 per cent of members that are paid late say they then pay their own suppliers late.
The survey showed that 43 per cent of FSB members are currently waiting for sums between £1 and £4,999. And in the past 12 months, 56 per cent of FSB members have written-off invoices worth between £1 and £9,999 because of non-payment and six per cent of members in the construction sector have written off £35,000 or more.
The Government's commitment to pay all invoices to small firms within 10 days has improved payment times. However, the latest ‘Voice of Small Business' panel survey has shown that 18 per cent of respondents are still being paid late by the public sector.
The FSB is calling on the Government to ensure that all public agencies follow the lead of central Government and pay all invoices to small firms within 10 days; that all contractors that the public sector uses pay their sub-contractors within the same time; and that all private sector companies used by the public sector sign up to the Prompt Payment Code.
With 53 per cent of small business owners saying that they spend between one and six hours per week chasing late payments, firms can take control by:
- Making sure there is a contract in place which confirms payment times and then penalties if payment is late – such as interest charges
- Offering a discount for prompt payment, dependent on the relationship with the purchaser
- Asking for payment up-front, or a deposit before work begins
- Talking to the purchaser before shipment to make sure that all sides know payment terms
Read related items on: