Two-thirds (66%) of small businesses are feeling the effects of clients who fail to pay their bills on time, research shows.
Banking group Close Brothers polled 900 small business owners and found the problem was particularly serious for 87% of SMEs in Northern Ireland, 73% in London and 72% in the South West.
Late payments have the potential to damage a business’ reputation and harm its credit ratings, which can affect a firm’s chance of securing future funding.
Government figures claim SMEs are collectively owed more than £26 billion in overdue payments.
74% of small businesses surveyed don’t feel suitable legislation exists to counteract overdue payments from debtors, with one in four firms forced to seek legal advice in search of a resolution.
Enterprises worst affected by late payments include:
- transport (78%)
- manufacturing (74%)
- printing (73%).
Neil Davies, chief executive at Close Brothers, said:
“Late payments are a very real issue for SME business owners and in some cases directors are having to defer their own salaries, increase their overdraft or pay their own suppliers late to ensure they remain liquid, causing the vicious circle to continue.”
Prompt Payment Code
The government’s Prompt Payment Code (PPC) intends to support under pressure businesses dealing with overdue payments.
32 of the biggest suppliers to the government have voluntarily committed to pay 95% of invoices within 60 days and are working towards adopting 30 days as the norm.
The PPC sets the standards for best practice for both businesses and suppliers dealing with late payments and invoices, ensuring everyone is paid on time and offered clear guidance on procedures.
We can advise on managing cashflow. Contact Andy Oakes.