On top of the news that lending to SMEs is increasingly difficult, research by the Forum of Private Businesses (FPB) released this week adds to those financial woes, showing that SMEs were experiencing late payments more often over the past year than ever before.
One practical suggestion is for late payers to be barred from Government contracts.
Just under a quarter (23%) of the FPB’s members reported that the number of clients who paid late had increased, with only 3% saying the problem had declined over the last year. Its members also reported an increase in the average length of time past the payment deadline.
FPB chief Phil Orford MBE commented, “upwards of £30bn remains tied up in late payments, costing a typical small business 130 hours a year to chase and meaning that a third are forced to seek external finance to cover the gaps in cash.”
Small businesses suggest that action needs to be taken in order to address this problem, with 36% keen to see persistent late payers barred from Government contracts. The Government itself has also expressed its desire to control this and is expected to release details of what action is might take once the parliament returns from recess at the end of this month.
Phil Orford added, “Government is mulling over responses to a recent late payment discussion paper, which revealed ample ideas for tackling the issue in a more robust manner including the reintroduction of compulsory reporting of company payment terms and practices, and annual checks for Prompt Payment Code signatories.”
Oli Randell, Local Business Partners’ MD and part-time finance director commented, “A part-time FD can offer advice and action regarding the problems attached to late payers, whether that’s credit control, debtor management or issues surrounding cash flow.”
He added, “many small businesses may feel they cannot challenge big company debtors so it’s important to note that there is expert help available to them if they need it.”