Small firms lay ?45bn late payment crisis at the foot of big business
The UK?s late payment crisis is rooted in large organisations taking advantage of small business owners dependent on revenue from their client, new survey findings have confirmed. Research undertaken by insurer Zurich showed that 53 per cent of overdue payments to small companies were being unpaid by companies significantly bigger in size. The study also looked at how late founders were receiving their payment. Almost half typically waited three months to see an invoice paid off, while a struggling 14 per cent were forced to wait six months for full payment. On average, small business owners were owed ?16,250 in unpaid invoices, with the total figure estimated at ?45bn. Past research from the Federation of Small Businesses (FSB) stated that effective action to address late payments would have saved 50,000 small firms from folding in 2014 ? an economic loss of ?2.5bn ??and the latest findings suggest the problem is worsening. Commenting on the study, Paul Tombs, head of SME at Zurich, said the behaviour of large businesses was ?not sustainable?. ?For small companies, working with larger organisations and strong brands is an important part of building and running a successful business. But, it is a two-way street and large organisations are simply taking too long to pay small suppliers, which are dependent on reliable, regular invoicing to cover their own costs,? Tomb said. He added: ?Large businesses should not be allowed to take advantage of their position in the food chain and remain unaccountable over their responsibility to pay their bills on time.? Meanwhile, half of respondents believed the government needed to take a stronger position to address late payments. The biggest move made by policy makers to challenge poor supply chain practices has been to create a small business commissioner who, it is hoped, will fight the corner of small business owners. However, awareness in the position remains low ? almost eight in ten founders had not heard about the commissioner previously. Tombs added: ?The introduction of a champion for small businesses is a great initiative, but the new commissioner must be more than just a figurehead.? Labour Party leader Jeremy Corbyn has previously committed his party to introducing a 30-day deadline for all payments to small suppliers. Despite the extent of working capital held up in late payments, Business Advice previously revealed the scandal of unfair payment terms. One small supplier told us that small business owners are often ?bullied? into long payment terms and handed invoice times of up to 90 days. Has the UK?s late payment culture affected your company? Take our short survey and help us fight the corner of small business owners
Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.
Despite new government efforts, the UK's toxic culture of late payments will take a lot more than a little legislation to fix. So, what can you do to protect your business against reluctant payers? Here are some top tips to arm yourself as best you can. more»