Late payments still hurting small firms

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 suppliers late.

The survey showed that 43 per cent of members are currently waiting for between £1 and £4,999. And in the past 12 months, 56 per cent of 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

John Walker, National Chairman, Federation of Small Businesses, said:

“There are always going to be companies that pay late, but there are steps that businesses can put in place to make sure that they don’t fall foul of the issue. We are pleased that the Government has stepped-up to the Prompt Payment Code – but there is more work to be done.

“In the current economic climate, every penny counts and for small businesses a late invoice can mean not being able to pay their staff. We need to see all businesses ensuring that they make payments on time if the private sector is to get on with the job in hand of strengthening the recovery.”

The FSB is the UK’s leading business organisation with more than 200,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at

About Wanobe, the business knowledge network
Writer, journalist and broadcaster, sixty-something David likes nothing better than being with family and friends, eating out and drinking great wines, and scuba diving.

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