There’s nothing more frustrating than waiting to get paid. Whether it’s that tenner your best friend owes you or a problem with your pay cheque, it’s never welcome news. For businesses, it is no different except the stakes are higher, something that can spell disaster. Nearly two thirds of British firms (60%) have experienced having to wait for 60 days or more for payment and almost half (47%) of small businesses having to wait 90 days or more for payment in the last six months.
This is according to the annual late payment study by Sage, the business software and service provider. It found one in ten small businesses have experienced ‘major’ cashflow issues as a result of late payments – with the figure rising marginally to 12% this year, compared to 11% last year.
Sage also found that a small numbers of businesses reported even more serious situations, with some paying wages late to staff (3%), being unable to pay overheads (rent, etc., 2%) or having their own credit rating downgraded (2%).
With small businesses reporting that larger businesses have extended their payment terms, it’s clear that small business are facing a threat to their cashflow and continued existence from onerous and overly long supplier payment terms.
The Prompt Payment Code can only go so far. In the most recent survey a quarter (26%) claimed that they had not heard of the government backed initiative to encourage suppliers to pay on time. On top of this, only 8% of businesses described the code as ‘effective’.
“Sadly in the last year there hasn’t been much headway stopping the late payment offenders on behalf of small businesses,” said Lee Perkins, managing director of Sage UK’s Start-up and Small Business Division.
This disappointing situation has led Perkins to call on businesses of all sizes to pay their suppliers on time. Lets hope his calls are heard because, even though the economic climate is getting better for SMEs, they can still suffer as a result of late payments.