SME bosses claim UK late payment problem has no easy solution
Business leaders have said there is no easy solution to the UK’s late payments problem, although action is needed as 50,000 firms could be failing annually as a result.
“There is no silver bullet here,” said the chief executive of the Chartered Institute of Credit Management, Philip King.
Leaders have called for a mix of peer pressure, government legislation and persistence when facing an issue that sees one third of small businesses paid late.
The Federation of Small Businesses has been particularly vocal on the topic, as tens of thousands of firms are failing every year as a result of cash flow problems as a result of late payments.
Suppliers are encouraged to agree terms up front and to check on the financial health of those they are dealing with.
Research from Concur has also revealed that smaller firms are being forced to delay the payment of salaries or to make redundancies as a result of late payments.
These steps to protect cash flows and reduce the risk of insolvency become a necessity when firms are waiting on high proportions of invoices to be paid.
Four in ten British businesses revealed they were paid late at least once in the last month, with the report raising concerns over the potential impact it has on job creation and growth.
However, medium-sized businesses are even worse off, as 63% of them are regularly paid late each month.
Around 23% of business deaths – equating to nearly 58,000 businesses – are currently caused by late payments, signifying the extent of the problem.
A third of businesses have also said that they would face significant financial problems if their biggest supplier was to delay payment by 90 days.
Concur estimates that more than 350,000 jobs are being lost each year as a result of late payments, alongside nearly £550 million that disappears in lost taxation capital.
Those figures do not take into account the fact that the average SME loses 16 days a year chasing payments, meaning the true impact of late payment practices could be significantly higher.
Administration could be another possibility if a business is facing pressure from creditors, although any decision should be made when all options are considered.
By Phil Smith