Small businesses hit by late-paying government

The latest ‘Voice of Small Business’ Annual Survey report shows that one in three payments from the public sector is made late, penalising small business owners that – by their small size – have less power to enforce prompt payment.

The poll, conducted by the Federation of Small Businesses and ICM, confirmed that small businesses have faced a challenging year, with 52 per cent of the 10,000 small firms surveyed reporting that profits had fallen in 2009.

“It is shocking that after the government put the Prompt Payment Code in place, so many businesses are still being paid late,” says John Wright, national chairman of the FSB.

The Prompt Payment Code was put into place to protect small businesses from government paying invoices late. Whilst, at the start of the recession, central government promised to pay small businesses within ten days, the FSB found that it makes one in three payments late.

This can have a devastating impact on small businesses, as while large firms have sufficient reserves to cope with late payments, a small business relies on payment with the agreed timescale to ensure it has a steady cash flow.

“Late payment is not a new issue, but it has been a particular problem in the past year, and it is more important than ever that this worrying practice is brought to an end,” adds Wright.

“The public sector needs to take the lead in more than word alone and set an example that paying late isn’t acceptable.”

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