Small Businesses Don't Believe In Late Payment Fines
Late payments continue to cause problems for Britain's small and medium enterprises (SMEs), a new study has shown.
Research undertaken by Hilton-Baird Collection Services confirmed that as many as 88 per cent of small firms were affected by a delayed payment in 2013 and this has inevitably caused cashflow issues for a lot of organisations.
This is having a knock-on effect further down the supply chain, as businesses that are still waiting for an invoice to be settled are failing to pay their own bills.
Many firms have had no choice but to take on more debt in order to plug the gaps created by late payments and in some extreme cases, companies have had to turn down work.
The government is searching for ways to improve the situation and some business groups have suggested that fines for late payments should be introduced.
However, the Hilton-Baird Collection Services study concluded that just 35 per cent of SMEs would support this proposal, while 55 per cent said they would not even entertain the idea.
The company's managing director Alex Hilton-Baird commented: "The extent to which a single late payment can impact upon the supply chain is a major concern. While it's obviously going to damage the supplier's cash flow, it's clear that many are being left with little option but to fight fire with fire."
These findings tie in with a recent report by payment processing service provider WorldPay, which found that UK sole traders and micro businesses are collectively owed up to £2.5 billion by late-paying customers each year.
Building and plumbing companies are the most likely to encounter delayed payments, with the average tradesperson having to wait up to 15 weeks before they get their money.
The study also indicated that 45 per cent of businesses that have been affected by late payments in the past 12 months have encountered cashflow problems as a result.
Expert Opinion
The Government and many across business regard smaller firms as vital to supporting and driving the continued improvement being seen in the economy. However, small businesses are only going to be able to provide such a contribution if they themselves are given the help they need to develop and expand. <br/> <br/>"Central to this is receiving timely payments, as the knock-on effect of late ones can be huge for small organisations – leaving them struggling to pay their own bills and meet their own targets. We would urge small businesses to review their payment systems to ensure they are offering clients a host of options with which to meet payments when they are due. <br/> <br/>"They should also consider regulatory and compliance issues to ensure that systems meet the recognised guidelines. There may even be scope to discuss this issue with legal advisers who could offer information on adding payment terms to contracts." Fergal Dowling - Partner