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Charlie Mullins: The impact late payments have on small firms can be devastating

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Now don’t get me wrong, if you do a job and get paid for it you should pay the relevant amount of tax. 

As a plumber I have always been concerned about the ‘black economy’ with cash in hand deals, which goes hand in hand with poor quality and terrible service, that have played a major part in creating a shady reputation for our industry.

It is a reputation I and many in my industry have battled against to make sure it is consigned to the waste pipe of business practices. 

Of course, if this kind of tax avoidance happens on a larger scale it is serious, but chasing up the odd tenner here and there is small beer compared to the billions of pounds owed to companies through late payment.

And while Balls was all over the broadcast media on Sunday (and this morning’s papers) questioning the moral practices of the nation’s handymen, a smaller story was squirrelled away that has a bigger impact on the economy.

According to Bacs research, late payment is resulting in more than three quarters of businesses waiting at least a month beyond agreed terms to be settled.

Late payments have resulted in additional costs amounting to a massive £8.2bn a year, which is the equivalent of £677 a month for each affected company.

Read more about late payment:

If you think that figure is mind-blowing, consider that Bacs’ study has revealed that companies employing less than 250 people are owned a staggering £32.4bn in overdue invoices.

The impact late payments have on small firms can be devastating. It also seriously affects the economy too. Companies are forced to rely on overdrafts or delay paying bills and staff. Some bosses have taken pay cuts to keep cash in their businesses to cover shortfalls.

This is a practice that has to stop. The government-backed Prompt Payment Code, which encourages better treatment of suppliers, is a step in the right direction as are government proposals to force businesses with more than 250 staff to publish details of how long they take to pay their bills.

However, there is a real need to get tough with these companies for the sake of the country’s SME backbone and the economy. Money greases the wheels of business, but if big firms keep the cash in their pockets for too long the cogs will seize up and firms will have to shed jobs, cancel investments and reduce the amount they pay to the Treasury.

So if Ed Balls wants to try and clamber back any semblance of credibility with the business community he’d be better off switching his focus from odd job men to companies that should pay their suppliers what they’re owed on time.

Charlie Mullins is the CEO and founder of Pimlico Plumbers.

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