Big Businesses Not Helping SMEs

Research has revealed this week that, not only do big firms owe small and medium-sized enterprises (SMEs) huge aged debt but that the ones who don’t use them as suppliers are wary of doing so.

Figures published this week show that SMEs are owed nearly £40bn as a result of late payments, meaning that their debt has grown to £39.4bn, from £30bn last year.

Bacs Payment Schemes, which facilitates financial transactions between businesses, said that 60 per cent of SMEs were experiencing late payments, with the average company waiting for £38,186 in overdue cash. Meanwhile, one in four SMEs admitted that if the amount it was owed grew to £50,000, the company would be faced with bankruptcy.

The Government wants to force companies to publish information about their payment terms in an effort to shame big businesses into paying suppliers on time as part of its Small Business, Enterprise and Employment Bill.

Ministers also plan to work with the Institute of Credit Management to strengthen the voluntary prompt payment code, which more than 1,500 firms have signed. The Code could involve an online rating system for late-payers.

Meanwhile, there are many big firms that do not do business with SMEs for various reasons, despite mounting pressure from the Government. In fact, new research shows that just 12 per cent of procurement managers in large concerns said they are planning to increase the number of contracts issued to SMEs.

The study attributed their reticence to the perceived “financial instability” of SMEs, combined with fears over non-compliance with standards and regulations.

However, some managers admitted that there were benefits to working with smaller companies, saying that they were flexible, efficient, and better-located than larger organisations in many cases.