FSB call to action over late payments to SMEs
The Federation of Small Businesses has reiterated its desire for the UK government to tackle late payment issues for SMEs.
Late payment is increasingly common and it can negatively impact on the cash flows of many small firms who do not have a great deal of finance available.
According to the FSB, an independent enquiry is required following meetings between FTSE 350 firms and small businesses relating to the deteriorating payment culture.
Efforts by the government are acknowledged but the FSB feels clearer actions are required to tackle late payment and supply chain issues.
Raising awareness of potential issued faced by small firms is important, as late payments could cause delays along the entirety of the supply chain.
This could mean companies find themselves in financial difficulty because of the actions of others who are not processing payments effectively.
Excessively long payment terms and firms that seek retrospective discounts can also put smaller firms under pressure, making it more difficult for them to survive.
In some cases, business restructuring or insolvency may be required, showcasing the severity of situations that can result from failed or delayed payments.
There are concerns that late payments could hamper potential growth for small businesses as they lack finance to expand or innovate due to what they are owed.
The FSB believes the meeting of business leaders and officials should lead to clean plans being implemented to tackle late and non payments.
Payment terms can vary but most small businesses see little reason why they should not be paid within 30 days.
However, terms in excess of 100 days have been reported in some instances.
This makes it very difficult for these businesses to manage their finances in an effective fashion, especially if they have no guarantees of when payment can be expected.
By Phil Smith