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BRIEFING
The research suggests delayed
payments are causing major cash
flow headaches for large numbers
of SMEs and adding costs to their
businesses as they waste time and
money chasing overdue invoices.
Almost two-thirds of the businesses
polled (60 per cent), spend at least a
day a month chasing payments that
should already have been made.
Close Brothers’ Business Barometer
mirrors other assessments of the UK’s late
payments problem. A series of reports and
surveys in recent months have highlighted
the issue, with organisations such as
the Asset Based Finance Association
warning the problem is escalating in some
industries, stifling growth and even leading
to business failure.
Government efforts to tackle the UK’s
late payments culture have so far failed
to protect hundreds of thousands of
small and medium-sized enterprises from
exploitative customers who fail to pay their
bills on time, according to Close Brothers
Invoice Finance.
The firm’s data shows 34 per cent of
all SMEs still see overdue invoices as a
problem for their business, with almost a
fifth of these firms (17 per cent) claiming
that the issue is seriously affecting their
ability to trade. That’s despite the fact
that successive governments have sought
to tackle the issue through a variety of
initiatives, including the Prompt Payment
Code, a voluntary standard, which has
seen more than 1,800 firms sign up to
commitments such as a promise to pay
invoices within 30 days.
David Thomson, CEO of Close Brothers
Invoice Finance, said that the UK’s
record on late payments is very poor and
that SMEs need better protection from
government and regulators. “While other
countries have seen late payment rates
come down as their economic fortunes
have improved, the UK’s business culture
seems to be one in which it is acceptable
not to pay SMEs on time,” he said.
“SMEs often lack the power to hold large
organisations to account and need greater
support from government to help them
do so.”
SMEs are awaiting details of the
Government proposal to set up a Small
Business Commissioner, which could be
given powers to intervene in disputes
between SMEs and larger organisations
over payments. However, it remains unclear
exactly how the scheme will work and
to what extent large businesses will be
required to participate.
“SMEs need better statutory
protection and an independent champion
prepared to take action on their behalf,”
Thomson added. “Many [SMEs] feel
very uncomfortable challenging larger
businesses, on which they may be reliant
for substantial amounts of revenue, over
late payments; this is where regulatory
action is essential.”
Thomson also urged SMEs to take
action wherever possible. “It’s crucial that
SMEs try to grip this issue themselves,” he
said. “You need to be crystal clear about
your payment terms at every stage of your
dealings with customers and to chase
invoices the moment they become due;
consider credit checks on new customers
and don’t accept poor practices from your
existing customers.”
The latest Close Brothers Business Barometer, the quarterly
survey of SME sentiment on a broad range of issues, has
found that more than one-third of companies are still
suffering with a major payment delay problem
Spotlight on late
payments to SMEs
David Thomson,
CEO,
Close Brothers
