SMEs reject government plans to fine late payers
A staggering 88% of the UK’s small businesses were adversely affected by late payments in 2013, according to the latest research, but it would seem government fines are not the answer.
The research from Hilton-Baird Collection services showed the large number of late payments but also found that just 35% of SMEs backed the idea of fining late payers.
The Department for Business suggested the concept of fines in a bid to tackle late payments but it was not received well by the businesses it was aiming to protect.
Some 55% of SMEs rejected the concept outright despite the fact that late payments can impact all along the supply chain.
According to Hilton-Baird, late payments cause a ‘domino-effect’ as almost half of the businesses affected then neglect paying their own suppliers as a result.
As a result, fines would ‘drip down’ the supply chain, causing more issues for businesses that are struggling as a result of late payments.
The major issue concerns the future of businesses, as many are reliant upon the money they are owed and may need to embark on a business restructuring plan to improve the running of the company.
Impact all along the supply chain
However, this issue can exist for all companies along the supply chain, given the reliance upon each other for finances, placing a great deal of stress on many companies that are only just recovering from the recession.
“The extent to which a single late payment can impact upon the supply chain is a major concern,” said Alex Hilton-Baird, managing director of Hilton-Baird Collection Services.
“While it’s obviously going to damage the supplier’s cash flow, it’s clear that many are being left with little option but to fight fire with fire.”
According to the report, a third of respondents were forced to take on more debt due to late payers, while one in ten had to turn away new custom.
Fines would also be left up to individual businesses to collect, something that could prove to be just as difficult as obtaining the initial payment.
“Even as a deterrent, fining late payers simply won’t work as, realistically, it will be left to the businesses themselves to enforce it,” added Hilton-Baird.
By Phil Smith