Late payments ARE getting worseA new report from Hitachi Capital Business Finance has revealed there is no let-up in the issue and in fact, it seems to only be getting worse. Based on its findings, there has been a 22% rise in the number of small firms spending time and money on legal action to chase a late payment.
The domino effect…Of course, late payment doesn’t only affect one business, it has a ripple effect that impacts on others too. If one firm is waiting on payments it can prevent it from paying its own suppliers, grinding the wheels of commerce to a complete stop.
As a fully paid-up member of the unofficial entrepreneurs’ union, this boils my blood.Unfortunately, this is also on the rise with a 14% increase in the number of SMEs being unable to pay suppliers because of late customer payments. The scariest statistic to come out of this report is that many entrepreneurs are slashing or stopping their income in order to ensure their employees get paid on time.
Employers are waving goodbye to their own salariesOne in five business owners are not paying themselves because unpaid invoices are affecting their cashflow. It’s even worse for small firms employing under 10 people where 40% of business owners questioned said their take-home pay is zero. As a fully paid-up member of the unofficial entrepreneurs’ union, this boils my blood. I admire every single person that sets up their own business, whether they work on their own, or preferably are able to employ people.
SMEs need good cash-flow the mostThese guys are what make this country great, and if their businesses are hit by cashflow issues due to late payments, they’ll start to die on the vine leaving the economy short of the very enterprises it so desperately relies upon.
Payment terms from large companies to SME suppliers have to be legally binding and when broken without agreement have to incur big fines.This is so frustrating because small firms need regular and consistent cash flow to survive. If they can’t get the money for the work they do, wages don’t get paid, investments can’t be made, and any prospect of growth is well and truly stubbed out. With more than 60% of SMEs being affected by late payments, this truly is an epidemic that will claim more and smaller business victims unless some serious action is taken.
Is the government doing enough – really?The government started naming and shaming late paying large companies this year, but it obviously hasn’t made them change their ways. The only way to get these companies to sit up and take notice is to hit them where it hurts – right in the wallet. Payment terms from large companies to SME suppliers have to be legally binding and when broken without agreement have to incur big fines.
This has to be a priorityThis may seem heavy-handed, but what other choice is there? It’s not as if anything that has been suggested before has worked! They can be encouraged to sign up to all the voluntary codes of practice the government can come up with and be made to put compliance statements on their websites, but it’s now time to take real action. Whichever party ends up in control of Westminster in the coming months, the politician that gets the hot seat at the Department of Business has to make this a priority. We can’t have SMEs held to ransom by large customers. They deserve to be paid for the work they do in decent time. The future of these businesses and the people they employ depend on it.
Share this story