11 March 2009 | Jake Kanter
The total value of late payments to small suppliers has risen by 40 per cent in the past year, according to payment processing body Bacs.
Latest figures, based on interviews with 463 UK small business owners, showed that overdue payments to vendors were worth £25.9 billion in 2008, a sharp rise from £18.6 billion the year before.
The report found that small suppliers are waiting an average of 41.5 days beyond their agreed payment terms for invoices to be settled. Around a quarter of suppliers said the main reason customers gave for late payment was problems with cash flow. Other firms said the wider economic downturn was offered as an excuse.
Bacs managing director Michael Chambers said late payment would be a major factor in the success or failure of small firms: "Action must be taken to address this crushing payment issue."
Phil McCabe, spokesman for the Forum of Private Business, said: "Late payment and bad debt are the scourge of business owners. Often they are major factors behind businesses being forced to close."
A recent poll of 100 buyers carried out by supplymanagement.com found 73 per cent would pay their bills quicker to assist struggling suppliers (News, 27 November 2008).