Large firms main cause of late payment issues

Larger firms are behind the majority of late payments to small businesses, according to new data from insurance firm Zurich.

It is suggested that the larger firms are aware of the SMEs’ reliance upon them for custom, and are therefore looking to take advantage.

The study found that 53% if late payments to small firms come from companies that are larger than them, with the average amount owed totalling more than £16,000.

Of the businesses facing late payments, 45% said they had to wait up to three months for payment, while 14% revealed they wait half a year.

For many small firms, working with larger brands is a key part of building their business and receiving wider recognition.

However, Zurich’s Head of SME Proposition Paul Tombs claims “large organisations are simply taking too long to pay small suppliers”.

Many of the issues that arise for smaller firms relate to cash flow, as they can struggle to cover their own costs given the lack of finance received from what they invoice.

Government efforts to tackle late payments have seen the introduction of new payment regulations for large businesses, as they must now detail the length of time it takes to pay suppliers twice annually.

A failure to do so means they can face prosecution, while the first ever small business commission takes the role in the autumn to further tackle poor payment practices.

However, it is not yet entirely clear what role the new commissioner will have, and while 73% of SME owners lauded the appointment as a ‘good initiative’, 78% were not aware of the role prior to being told about it.

Around half of owners told the Zurich study that they believe the Government should do more to help businesses like theirs.

Meanwhile the Government believes that tackling late payments could prevent upwards of 50,000 businesses every year from entering insolvency and ceasing trading.

The pressures placed on cash flow are the most common reason for firms going out of business, if they are unable to source alternative finance options or seek viable restructuring methods.


By Phil Smith


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