Despite positive news on the UK economy, the continuing culture of late payment remains a concern for many small businesses according to the latest research from the national small business group, the Forum of Private Business.
In the organisation’s latest banking and finance survey, 23% of members reported an increase in late payment over the past year compared with just 3% who reported a decrease. 29% have also seen an increase in the average number of days beyond the deadline that a payment is made late whilst eight percent reported a decrease, and 19% have seen an increase in both elements of late payment.
While the improving economic situation means the number of businesses seeing late payment as a serious problem has remained static, small businesses are still keen to see more measures to tackle the issue. 39% of businesses surveyed would like to see prompt payment better promoted, 37% would prefer to pay VAT on money that has entered their account rather than when an invoice is submitted and 36% wanted to see persistent late payers barred from government contacts.
Commenting on the results of the survey, Phil Orford MBE, chief executive of the Forum of Private Business, said: “Improving cash flow is the likely cause for late payment issues remaining static, despite lengthening payment terms. However, 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.”
Government is mulling over responses to a recent late payment discussion paper, which revealed ample ideas for tackling the issue in a more robust manner including the reintroduction of compulsory reporting of company payment terms and practices, and annual checks for Prompt Payment Code signatories.
“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.”