31 Jul 2018
Small firms across Britain are suffering from a £14billion late-payment crisis, it has been claimed.
The Federation of Small Businesses (FSB) estimates that late payments lead to the demise of 50,000 small companies a year.
The organisation is also reporting that the number of small ventures planning to decrease investment has hit an 18-month high.
FSB national chairman Mike Cherry said: “It’s hard for small firms to invest when £14billion is being withheld from them due to late payments.
"If all of your working capital is tied up in invoices, then clearly you won’t have the cash needed to invest for the future. Following the collapse of Carillion, big corporations need to realise that late payments aren’t a smart move - they’re a threat to our economy."
So what can you do make sure your business gets paid on time?
Aberdein Considine Partner Ross Webb is one of Scotland’s leading debt recovery lawyers and acts for many of Scotland’s lifeblood SMEs.
He says businesses should follow these five key steps to make sure they avoid losing out.
If you would like to speak to Ross or a member of his team about debt recovery, call 0333 0044 333 or click here.
Mr Cherry has now contacted bosses at the country's biggest businesses. He wants them to work with small firms to help foster a new payments culture in the UK.
Research from FSB shows 84% of small firms report being paid late, with a third saying at least one in four payments they’re owed arrives later than agreed.
Nearly four in 10 say that agreed payment terms have lengthened in the past two years, hampering cash flow. Only 4% report that payment terms are improving.
FSB is calling for a non-executive director on boards to be given a specific responsibility for good supply-chain practice, including making sure the firm is opting to follow best practice and lead the way - not just doing the absolute minimum or the best it can get away with.
Mr Cherry said: “The poor payment practices that run rampant through UK supply chains is a national disgrace with the country falling behind almost all other industrialised nations in our ability to pay small businesses on time.
“Carillion’s demise shone a light on the worst kind of payments practices, but unfortunately it isn’t a one-off. Some big businesses use inequality of power in business relationships to squeeze small suppliers and delay payments to improve their own cashflow. This is bullying, pure and simple.
“These practices are putting small businesses at risk forcing many to turn to personal credit cards or overdrafts just to survive. Sadly, we estimate late payments lead to 50,000 small businesses a year closing their doors - costing the economy £2.5billion annually."