Late Payment is Problematic for Small Businesses

A new report from the Federation of Small Businesses (FSB) has revealed that late payment practices continue to be a major issue for small businesses, and that existing policy interventions have had no discernible effect on tackling the problem in the last five years.

In reality, the problem appears to be worsening, with small businesses reporting that, on average, 30% of payments are typically late, compared with 28% in 2011.

The impact on small businesses can be devastating, with 37% running into cash flow difficulties, 30% have been forced to use an overdraft and 20% say late payment has hit profits.

At the extreme end, late payments and resulting cash flow difficulties have caused businesses to fail.  In 2014, if payments had been made on time and as promised, 50,000 business deaths could have been avoided, growing the UK economy by £2.5 billion.

“Uniquely, the UK now risks having a business culture where it is acceptable not to pay SMEs on time,” commented Mike Cherry, National Chairman at the FSB. “Based on an imbalance of power between large companies and their small suppliers, this now has a chilling effect right across the economy. It’s distressing to hear from our members that in 2016 the average value of each late payment now stands at £6,142.”

“Small businesses have to run a tight ship with their cash flow, and as they struggle with increasing business costs on one hand and an uncertain domestic economy on the other,” he added. “They should not also have to struggle with the stress, time and money required to chase overdue payments from corporate giants.”

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