Late payments are no laughing matter - even when you’re a clown
A third of invoices from East of England small firms are paid after 30 days by large companies, according to new research.
According to the study – by Lloyds Bank Commercial Banking and the UK Small Business Commissioner – 34% of invoices issued by small businesses in this area of the UK take longer than 30-day payment terms, which is above the national average of 32%.
Invoices are taking 38 days on average to be paid to the region’s small firms. More than a fifth (21%) of large businesses report an average bill payment time of 50 days and above.
This is well above the Small Business Commissioner’s recommended exemplar of 30 days, and these firms, in effect, using their supply chain to finance their businesses.
As a result of the research, the small business commissioner, Paul Uppal, is to recommend a traffic light warning system to give small firms a signal about which large businesses pay their bills late.
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“A traffic light system would be a simple and effective way of demonstrating which larger firms have structured their supply chain in such a way that it is more than an exchange of good or services but also resembles part of their financing model,” he said. “This is money that could be used to grow smaller businesses and generate tangible economic activity. Instead it is stuck on large firms’ business ledgers doing nothing.”
Andrew Davis from Lowestoft, who works under the name ‘Andy the Clown’ and takes over as president of the World Clown Association in March, said he has been affected by late payments in his line of work. “But as soon as I realise that they are late payers, then I go work for someone else - you learn from experience,” he said. “I have had particular issues with being paid late by a certain brewery. Their payments system worked really well until there were breaks in the chain, then it would slow right down.”
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Adam Storey, a director at Ocala Healthcare, a small healthcare recruitment agency that operates in Suffolk, explained that their payment terms range from 14 to 30 day terms - but staff are paid weekly. “As a small business that is self-funded, it puts a lot of pressure on the business when invoices are not paid promptly,” he said. “The most difficult situation when dealing with big business is that they can have inflexible processes, if an authorising manager is off for a week and misses a pay run then payment can over run by a further month.
“This puts serious strain on small businesses when managing cashflow.”
Tony Addison, explained that his company, Free Rein, a digital marketing and technology business in Hadleigh, signed up to the government’s Prompt Payment Code, which was designed to help small businesses get paid on time, at the outset. “We labour the point that we pay our smaller suppliers either on day or receipt or within seven days,” he explained. “The result has been very good payments from our public sector clients (7-21 days) and only certain medium sized clients pushing the terms.
“But you have to be firm and charge your terms and conditions interest when they are delinquent regularly.
“Government need to give the Code real teeth though, and small businesses need to be firm about payment within terms. This is hard to do with some larger clients, but has to be done.”