Late payments soar
Mar 11 2009
Late payments are an added burden for SMEs
Time really is money for SMEs, as research reveals that overdue payments have rocketed over the past year.
According to payment processing body Bacs, the amount of late payments owed to small businesses increased by 40 per cent from £18.6 billion in 2007 to £25.9 billion in 2008.
Oliver Hemsley, founder of gardening company Painted or Planted is currently waiting for £16,000 in outstanding invoices.
He says: ‘People are using the credit crunch as another excuse they can add to their book of reasons for not paying on time.
‘I have seen an increase in late payments of around £5,000 to £6,000 over the past year. I don’t have any money in my account [at the moment] as I get paid last. The public needs to understand the consequences this is having on small businesses.’
Phil McCabe, spokesman for the Forum of Private Business, believes one of the reasons for the increase in late payments is big businesses delaying payment to suppliers.
He says: ‘The problem has intensified as a direct result of the credit crunch and economic downturn. As prompt payment can mean the difference between trading profitably and not trading at all, many small businesses are now looking to the year ahead with considerable trepidation.’
In December, the government introduced a voluntary Prompt Payment Code, which asks companies to pledge to adopt measures such as paying suppliers on time.
A spokesperson from the Department for Business, Enterprise & Regulatory Reform said: ‘It’s vital that we do all we can to support firms and help them to maintain cash flow at this time.
‘No-one benefits when good businesses fold because of a lack of cash flow.’
According to Bacs, SMEs are now waiting an average of 41.5 days beyond agreed payment terms for invoices to be settled.
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