Managing Your Cash Flow
Late payments cascade down the supply chain
2 min read
25 March 2014
Almost nine in 10 (88 per cent) small businesses was affected by late payment in 2013, but most reject the idea of Government fines for those responsible, according to research released today.
The survey by Hilton-Baird Collection services found that late payments are causing a domino effect along the supply chain, with almost half of those affected neglecting to pay their own suppliers as a result.
Alex Hilton-Baird, MD of Hilton-Baird Collection Services, said: “The extent to which a single late payment can impact upon the supply chain is a major concern. While it’s obviously going to damage the supplier’s cash flow, it’s clear that many are being left with little option but to fight fire with fire.”
A third of small businesses has had to take on more debt as a result of late payments and one in ten has turned away new customers.
Hilton-Baird added: “With no credible sanctions in place – statutory interest is still vastly underused and the less said about the Prompt Payment Code, the better – businesses are commonly treating invoices as interest-free loans. It’s a deeply troubling situation.”
The Department for Business is currently consulting on how to deal with this phenomenon, and it has been suggested they could introduce fines for those paying late.
But the survey found just 35 per cent supported this idea, and a small majority (55 per cent) rejected it altogether.
“Even as a deterrent, fining late payers simply won’t work as, realistically, it will be left to the businesses themselves to enforce it,” Hilton-Baird said.
“If they can’t collect an invoice, how much success will they have trying to impose an additional fine? In reality, it’s down to businesses’ credit control departments to ensure they’re doing all they can to protect themselves.”