Partner Article

Late payments pose a serious problem for small business owners

The Federation of Small Businesses (FSB) has reported that almost three quarters of small businesses have been paid late in the last 12 months.

This is a major issue for many SMEs, as they do not have the same financial buffers available to larger enterprises. This often causes a vicious circle for many, as 38% in turn are unable to pay their employers.

43 percent of those questioned are awaiting payment, while over half have been forced to write off invoices worth between £1 and £9,999. In the construction sector, 6% of businesses have had to write off payments of £35,000 or more.

While the government has succeeded in their pledge to pay invoices to small firms within ten days, the survey also showed that public sector clients had paid nearly a fifth of survey respondents late.

The FSB is now putting pressure on the Government to encourage all public agencies to follow their lead to pay promptly, and also to advise all private sector companies used by the public sector to sign up to the Prompt Payment Code.

John Walker, National Chairman, Federation of Small Businesses said: “There are always going to be companies that pay late, but there are steps that businesses can put in place to make sure they don’t fall foul of the issue.

“In the current economic climate, every penny counts and for small businesses.”

The Federation has also issued advice to small businesses who are struggling with late repayments including confirming payment times and issuing penalties if clients are late. The FSB is also encouraging businesses to keep conversation channels open so both sides are aware of payment terms.

Walker added: “We need to see all businesses ensuring that they make payments on time if the private sector is to get on with the job in hand of strengthening the economy.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .