Small business bears brunt of cost of late payments

ALMOST three quarters of small firms have been paid late in the past year, often causing a "vicious circle" of delays to settling up with their suppliers, a report yesterday claimed.

A survey of 1,700 Federation of Small Businesses (FSB) members also found that two out of five were still owed bills of up to 5,000. More than half of those questioned said they had written off invoices worth up to 10,000, while some smaller companies in the construction industry have written off bills for more than 35,000.

The FSB said the UK government's commitment to pay all invoices to SMEs within ten days had improved payment times.

John Walker, chairman of the FSB, said: "There are always going to be companies that pay late, but there are steps that businesses can put in place to make sure that they don't fall foul of the issue.

"We are pleased that the UK government has stepped up to the prompt payment code, but there is more work to be done.

"In the current economic climate, every penny counts and, for small businesses, a late invoice can mean not being able to pay their staff."

Chuka Umunna, shadow minister for SMEs, added: "More than 4,000 businesses have needlessly gone bust since 2008 due to late payments and these statistics underline just how pressing this problem still is."