Supply chain · 24 April 2018

Small business suppliers beware: The FTSE 350 sectors failing to pay small firms on time

FTSE 350
FTSE 350 firms paid invoices over two weeks late on average in 2017

Britain’s late payment crisis is continuing to hamper cash flow, growth plans and even survival rates of the country’s small firms. Government efforts to hold large firms accountable are yet to generate confidence among small business owners, and new data has provided yet more evidence of the task at hand.

After analysing invoice data from over 250,000 of its small business customers, accounting software provider Xero found that small firms across the board – from suppliers to freelancers – were paid an average of ten days late for each invoice in 2017.

However, the UK’s largest firms – those inside the FTSE 350 index – were found to have payment records exceeding the average, paying suppliers 16 days later than agreed terms.

Overall, FTSE 350 firms paid smaller suppliers on 30-day terms after 46 days on average – over two weeks late. Closer analysis of Xero’s data uncovered which FSTE 350 sectors had the worst records when paying small suppliers on 30-day terms.

Worst FTSE 350 sectors for invoice payment

Sector
Average payment on 30-day terms
Food producers 60 days
Construction 57 days
Household goods 53 days

Best FTSE 350 sectors for invoice payment

Sector
Average payment on 30-day terms
Real estate investment trusts 38 days
Financial services 35 days
Life insurance 33 days

The most erractic payments were found in the pharmaceuticals and biotechnology sector, with invoices paid after 68 days in June 2017 but 37 days the following September.

Commenting on the data, economist Vicky Pryce said the impact of late payments “cannot be exaggerated”, citing research showing direct correlation between late payments and poor cash flow at small firms.

“Many are left with no option but to request extensions of overdraft facilities and increases in their financing costs and in bank borrowings,” she said. “Late payments prevent the economy from reaching its productive potential.”

Recent research from the Federation of Small Businesses (FSB) has suggested as much as £18bn is held up in late payments.

Despite government vows to eliminate “the continuing scourge of late payments”, Paul Uppal, the government’s recently appointed small business commissioner, invited business owners to make the first move.

He said: “My role…exists to help small businesses get paid on time, and while the government works on measures to address the late payment epidemic, businesses should not be afraid to come to us for help. Now is the time to make Britain the best place for entrepreneurs to flourish.” __________________________________________________________________________________
Unfair terms

 

Payments scandal: It’s not late payment, it’s unfair payment terms to start with

As the government sets its focus onto late invoice payments, Business Advice has previously revealed that excessive payment terms could be the underlying problem within Britain’s supply chains

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ABOUT THE EXPERT

Simon Caldwell is deputy editor at Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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