Later payers put pressure on small firms

SMALL businesses in East Anglia are being badly hit by late payments, a survey has found.

SMALL businesses in East Anglia are being badly hit by late payments, a survey has found.

The small business barometer, by Close Invoice Finance, found the region was the worst affected by the problem with 48.8% of small and medium-sized enterprises saying late payments were an issue for their business.

The latest figure for the region contrasts with the findings of a similar study in 2009, when a third expressed a concern over the issue. In other parts of the country, such as the South East, the South West and Northern Ireland, the percentage of SMEs which felt it was an issue was far lower at around 28%, 24% and 22% respectively.

Big businesses were among the worst late payment offenders, the survey found.

The Federation of Small Businesses (FSB) said it had been concerned about the problem for some time and had worked with central government on a late payment campaign, aimed at trying to persuade public sector organisations to pay up promptly.

The survey of over 500 SME owner managers revealed that nearly half of SMEs in the East of England (45.8%) typically have to wait for payment 31 days over agreed terms, considerably increasing business exposure to the risk of bad debt.

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FSB East of England policy manager David Burch said they had done “quite a bit of work” encouraging local authorities to sign up to a prompt payment code promoted by the Government.

“Many of the councils do pay up pretty promptly,” he said.

“But we are noticing that bigger companies are not paying up promptly and are actually on occasions far from reducing the time they pay, they are actually extending it.”

Some were taking more than 30 days, others up to 60, and some even as much as 90 to 100 days to pay, he said, while SMEs felt powerless to do anything that might jeopardise an important contract.

“Just over a third of members have said they have been affected by late payments from large businesses, that's across the East of England,” he said.

“It's very, very difficult if you have got contracts with the bigger companies. If you rock the boat too much you are in danger of losing that contract.”

Big corporates were singled out as the worst culprits for paying up late by 39% of SMEs questioned. By comparison just 23% found micro businesses unreliable payers and 22% thought public sector organisations settled their accounts late.

David Thomson, chief executive officer of Close Invoice Finance said: “At a time when the economy seems to be improving, it's sad that issues like late payment are still holding SMEs back from taking proper advantage of the potential upswing.

“Failure to settle up accounts on time can have a devastating effect on an otherwise viable business. So it's vital to take get your risk management strategy in working order to avoid being left vulnerable to bad debt or cash flow issues in the longer term. For peace of mind, SMEs should consider investing in cash flow management tools which provide protection against the impact of these issues.”