According to the Forum of Private Business, despite positive news on the UK economy, the continuing culture of late payment remains a concern for many small businesses.
The organisation’s latest banking and finance survey has revealed that 23% of members reported an increase in late payment over the past year compared with just 3% who reported a decrease. In addition, 29% have seen an increase in the average number of days beyond the deadline that a payment is made late, while 8% reported a decrease and 19% have seen an increase in both elements of late payment.
Although the improving economic situation means the number of businesses viewing late payment as a serious problem has remained static, small businesses are still keen to see more measures to tackle the issue. Of the businesses surveyed 39% 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.
Chief executive of the Forum of Private Business, Phil Orford MBE, 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.”
The Government is considering responses to a recent late payment discussion paper, which revealed many 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.
Mr Orford: “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.”