Almost three quarters (73%) of businesses have been paid late in the last 12 months and the worst offender for the majority (77%) is other businesses, according to the latest research by the Federation of Small Businesses (FSB).
The research found that 38% of FSB’s members that are paid late then pay their suppliers late. The report stated that small firms do not have the “same cash-flow buffers as larger businesses” and so being paid late “causes a vicious circle”.
The survey also showed that 43% of businesses were currently waiting for between £1 and £4,999. And in the past 12 months, 56% of members had written-off invoices worth between £1 and £9,999 because of non-payment and 6% of businesses in the construction sector had written off £35,000 or more.
The FSB said that the Government’s commitment to pay all invoices to small firms within 10 days had improved payment times, but the latest “Voice of Small Business” panel survey showed that 18% of respondents were still being paid late by the public sector.
The survey also found that 53% of small business owners spend between one and six hours per week chasing late payments.
The FSB is calling on the Government to ensure that all public agencies follow the lead of central Government and pay all invoices to small firms within 10 days; that all contractors that the public sector uses pay their sub-contractors within the same time; and that all private sector companies used by the public sector sign up to the Prompt Payment Code.
John Walker, national 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 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. We need to see all businesses ensuring that they make payments on time if the private sector is to get on with the job in hand of strengthening the recovery.”
