Small firms demand action to tackle late payments

IMPROVING economic conditions are doing nothing to ease the continuing problem of late payment of bills for small businesses, according to new research.

Phil Orford: £30bn plus is tied up in late payments

The Forum of Private Business says its members want to see new measures introduced to tackle the issue, which not only affects cash flow but is also adding to their costs.

Some 23 per cent of those questioned reported an increase in late payment over the past year compared with just 3 per cent who reported a decrease.

Sign up to our daily newsletter

The i newsletter cut through the noise

The organisation’s banking and finance survey added that almost a third (29 per cent) have seen an increase in the average number of days beyond the deadline that a payment is made late against 8 per cent reporting a decrease.

The forum said that small businesses are keen to see more measures to tackle the issue and 39 per cent would like to see prompt payment better promoted.

More than a third (36 per cent) say persistent late payers should be barred from government contracts, while 37 per cent would prefer to pay VAT on money that has entered their account rather than when an invoice is submitted.

Phil Orford, chief executive of the forum, said: “Upwards of £30 billion remains tied up in late payments, costing a typical small business 130 hours a year to chase and meaning that a third are forced to seek external finance to cover the gaps in cash.”

The UK government is mulling over responses to a recent late payment discussion paper, which revealed ideas for tackling the issue, such as the reintroduction of compulsory reporting of company payment terms and practices, and annual checks for Prompt Payment Code signatories.

Orford added: “It is essential that government uses the recommendations to introduce effective measures and accepts that it not only has a responsibility to play in this area but also that its increased action can also act as an important catalyst for better payment practices.”