Government statistics show that small businesses are owed on average £6,142 mostly by larger firms not paying them for goods and services on time. Bad practices range beyond simply paying late to include larger firms forcing a discount off an already agreed price, paying-to-stay (smaller companies pay larger firms to remain a supplier, but without the promise of any actual work) etc.
The research shows 37% small businesses have run into cash flow difficulties, 30% have been forced to use an overdraft and 20% cite a slowdown in profit growth. If all payments were made on time perhaps 50,000 more businesses could be kept open each year, whilst the UK economy would receive a £2.5 billion boost.
FSB is now campaigning for every large company to have a Non-Executive Director responsible for good supply chain practice – reporting to the Board as head of a sub-committee, reporting to the AGM, and writing in the Annual Report of what the company is doing to help their suppliers. The Government is listening, and has adopted this model for its own Departments
The new proposals, building on action government has already taken to improve access to finance and the appointment of the Small Business Commissioner, include:
the call for evidence to consider the best way company boards can put in place responsible payment practices throughout their supply chain, for example giving a non-executive director specific responsibilities for the company’s prompt payment performance, promoting innovative technologies, such as the latest accounting software, to help small firms manage their payments processes, and empowering trade bodies to highlight the best and worst practices in payment behaviour
The government has also set the ambition that all its departments commit to paying 90% of undisputed invoices from SMEs within 5 days and ensure all government departments have a dedicated non-executive director responsible for prompt payment, improving payment practices and exploring how better to use technology to make payment processes more efficient.
If you have seen the problems caused by such late payments – let us know, by email.