Late payment continues to be a persistent problem in the business community, particularly for smaller companies who tend to be disproportionately affected. Exactly how big of a problem is it?
Estimates vary. According toresearch by Bacs Payment Limitedthe amount owed in late payments now stands at £41.5 billion.On the other hand, arecent pollof 1,000 business owners found that the average small-to-medium sized enterprises are owed £40,857 in unpaid invoices and £20,937 of that total is overdue. Extrapolated across the small business community of the UK of 5.2m firms would mean an unpaid bill of £212 billion.Our latestBusiness Distress Index reportfound that half (49%) of UK businesses had invoices paid late by customers in the last six months.Smaller companies bear the brunt of the problem, with 7% of sole traders saying they have 41-50% of invoices paid late, compared to just 1% of companies employing over 250 people.Not only does late payment have a detrimental impact on the business paid late but there can be a knock-on effect. Theresearch by Bacs also revealed that as a result of a delay in receiving payment from customers, 23 per cent of UK businesses are forced to pay their own suppliers late.The practice can needlessly jeopardise businesses throughout the whole supply chain, and for some, it can spell serious financial difficulties. In fact,R3 members believethat late payment by customers for goods and services is a primary or major factor in one-in-five corporate insolvencies.Earlier this year the FSBcalled for an independent inquiryinto the UK’s poor payment culture ‘to get clear actions and the progress needed to tackle late payment and supply chain bullying’.In his first speech as Business Secretary, Sajid Javid, recognised the extent of the problem, acknowledging the role it can play in forcing a company into insolvency, and outlined his ambitions for tackling the issue in his Enterprise Bill. Among proposals is the establishment of a Small Business Commissioner,a consultation on which has been recently launched, to help resolve business-to-business disputes, particularly over late payment. From next year, there will also be aban on anti-invoice finance terms in contractswhich will help small businesses secure finance against money owed to them in invoices.The government has announced some measures on late payment before; time will tell if these new proposals can help solve one of the thorniest issues in businesses’ sides.
