23 August 2001 | David Arminas
Further evidence of increased delays in settling invoices amid an economic downturn is making a late payment crisis likely.
A major survey shows some sectors taking two weeks longer to make payments than they did last November. Large gas companies are the slowest, taking on average 91 days to settle, 16 days longer than in November.
Average payment time has risen from 59 days in November to 60 days in May, according to the biannual survey from information solutions firm Experian, which covers 29 sectors.
Despite the Late Payment of Commercial Debts (Interest) Act 1998, which allows small companies to charge interest on late payments, few are doing so for fear of losing business, an Experian spokesman said.
"It is likely we will see a further increase in late payment in the next survey," he said.
A recent report from analysts Dun & Bradstreet, compiled for the Federation of Small Businesses, showed payments were made on average 46 days after invoicing. Procurement staff were found to rely on finance department decisions about when to pay, making supplier relations difficult.
CIPS recognises there is a problem, said Melinda Johnson, its head of policy. "The main point is to pay on time," she said. "Purchasers should make sure their company is doing so."
The Experian survey found that the size of a company and the sector in which it is working are major factors influencing payment times.
Medium-sized electricity and building materials companies joined medium and large textile and electronics companies in increasing their average payment times by four days or more from November's figure.
By sector, the slowest performer was oil, with companies adding nearly nine days since November, taking 76 days for payment on average.
The greatest improvement by sector was financial services, which is paying invoices three days earlier at 58 days.
Research carried out by the University of Leeds' Credit Management Research Centre (CMRC) backed up the trend, finding that less than half of invoices are paid on time.
Suppliers in the business and financial services, manufacturing and wholesale sectors are being paid up to 26 days past the due date, reaching 56 days from invoicing in some cases, according to the CMRC's quarterly survey for August.
From November 2002, large companies will have the right to charge interest on late payment from small companies.