Half of SMEs view slow payer ethic as threat to business
Half of the UK’s small businesses are affected by slow payer ethic and majority view the issue as a potential threat to their business.
Even as Duty to Report regulations are implemented, research from Bottomline Technologies found that 38% of UK financial decision makers view slow payer ethic as their biggest challenge.
Large businesses are targeted by the new regulation, as the Government is keen to ensure that it is no longer possible for firms to hide behind payment processes and complexity.
The UK Payments Barometer Report detailed the issues that firms have when attempting to get their invoices paid.
It suggests that current levels of late payments – whereby in the region of £41.5 billion in overdue payments is owed to SMEs by larger firms – is unacceptable.
The new regulation meanwhile will see larger firms and limited liability partnerships publishing information on their payment practices twice yearly.
All of this information will be available to small businesses and a failure to report it by the larger firms will be a criminal offence that will see both the company and its directors liable for fines on conviction.
The report states that the current slow payer ethic that exists is “not good enough” and warns businesses that the Duty to Report rules should be a wake-up call to everyone.
For those that have been successful in ensuring payments on time, they listed collaborative customer relationships as being a defining factor, while the use of Direct Debit and supply chain finance arrangements also helped speed up the process.
Introducing modern payment technology can support businesses by allowing for efficient money transfers – this also reduces any potential pressure that could be placed on the cashflow of a business.
For small businesses operating on tight margins such issues can cause financial distress, bad debts and even insolvency in severe instances.
A range of alternative finance options also exist for businesses that are keen to ensure their longevity in the face of delayed payments or other financial issues.
By Phil Smith
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