The culture of late payments is growing in the UK, according to Market Invoice, and small businesses owners are paying the price. Small companies without large capital contingency funds are struggling to balance the books, and are facing the dilemma of having to turn down additional work from large companies or begin the arduous process of legal action to reclaim missing revenue.
A study by Market Invoice has shown that more than 60% of small companies are paid late. The study was based on 6,000 invoices, 10% of which were paid more than 30 days late.
The growth in the culture is largely attributable to the last six years of recession, with companies looking to stretch quarterly budgets – beginning chain reactions between late payers till it became the accepted standard. However, whilst large companies are able to offset the damage of a late payment, it is a different story for the UK’s growing SME market, for who a missed payment could spell the end.
“Late payment is a silent but significant killer of businesses, and it has become a dangerous norm for blue-chip organisations to pay invoices beyond the agreed terms,” said Anil Stocker, co-founder of Market Invoice.
“Consistent late payment damages our economy and almost every high street name is doing it.”
New rules have been recently proposed by the government to tackle the issue. Business secretary Vince Cable has said that the new rules are intended to come into action in March 2015, and will require larger firms to publish information on their payment practices.
The Department for Business, Innovation and Skills said: “For too long, too many companies have been getting away with not paying suppliers on time. It is small businesses that are suffering most from the consequences of late payment.
“Through the Small Business, Enterprise and Employment Bill, we will be making it compulsory for large and listed companies to publish information about their payment performance and practices so those who are not playing fair can be held to account.”