Ending the scandal of late payment
News of the government’s plans to appoint a ‘late payments tsar’ highlights an on-going problem for SMEs. It is estimated that the UK’s small firms are owed £26 billion in late payments.
As an invoice finance provider, Ashley Business Finance works with many small suppliers and we see at first hand the treatment they receive. First they are beaten down on price, then they are obliged to agree to payment terms as long as 90 to 120 days. In most cases they are too afraid to speak up.
It’s easier to deal with a small supplier with a flexible approach than a bigger company which will insist on its own payment terms and have a professional credit control team to chase money outstanding.
Some of the worst cases involve big companies which are household names. Cynically, they may even boast to customers that they buy from local suppliers, but don’t mention the terms that they impose.
John Leech, Ashley’s new Business Relationships Director, says: “We hear a lot about fair trade for suppliers in developing countries but what about small firms in the UK? Late payment is a factor in one in three insolvencies, according to the insolvency trade body R3, so there is no doubt these practices are driving small firms to the wall. As SMEs account for around half of private sector employment, that has a knock-on effect on jobs.
“It’s time for big companies to take a more responsible approach. Previous attempts which include legislation and the Prompt Payment Code which aims to make 30-day payment the norm have failed to make much impact. Let’s hope the late payments tsar has the necessary powers and influence to have more success!
“Ultimately the solution may lie with consumers. By raising awareness, we can hope they start to recognise the damage being inflicted on British business and use their spending power to ensure big companies play fair.”