Two-thirds of small and medium-sized firms (SMEs) are suffering from late payment, an Institute of Directors (IoD) survey reveals today.
Half of the SMEs who have issues with late payment said that it had forced them to change business decisions, with many unable to grow their business as planned or having to reorganise their financing arrangements because invoices had not been settled. More than a quarter said they had been compelled to delay payment to their own suppliers, which the IoD said showed how the issue can affect the whole supply chain.
Of those firms which had experienced problems, nearly half (47 per cent) said the main reason for late payment was excessively bureaucratic payment systems or overly complex terms and conditions.
One in eight firms said payment had been delayed because the company being invoiced had changed the payment terms. Only 5 per cent said the reason for late payment was a dispute over the invoice.
James Sproule, chief economist at the IoD and a member of the advisory board of the Prompt Payment Code, under which large firms commit to paying suppliers on time and deal with disputes fairly, said: “Business is all about negotiation, and both sides of a deal want to get the most favourable terms, but when big companies deliberately delay payment it has serious consequences. Small and medium-sized businesses employ more than 14 million people in the UK, making up half of the economy, so it’s very worrying that late payment is a problem for so many.
“We urge those businesses who are pushing their suppliers too far to realise that the stability of an entire supply chain can be undermined by one firm failing to pay on time.”
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