Small suppliers fail to tackle late payment

16 April 2010

16 April 2010 | Nick Martindale

Less than half of UK small and medium-sized suppliers that have encountered problems with late payment over the past year have taken measures to improve cash flow, according to research by NatWest and Royal Bank of Scotland (RBS).

The study found that the 500 companies polled were owed a total of £15.7 billion from invoices that were more than 120 days late, and had an overall total of £62 billion outstanding.

But only 11 per cent had hired an in-house credit controller, 9 per cent had turned to invoice discounting and 8 per cent had used factoring to improve their cash position.

Peter Ibbetson, chairman of small business banking at RBS, said: “Bad debts and late payment of invoices are endemic problems for UK businesses. What’s concerning is that so few are making use of services from their bank to help alleviate the problem.”

Wholesalers were the worst affected by late payment, with 93 per cent suffering “considerable” delays, compared with 66 per cent of retailers.

Separate research from Barclays suggests suppliers are more likely to write off debts than to chase late payers. Of the 1,000 small companies polled, 720,000 wrote off debt at an average of £2,529 each. This was more than twice the level in 2008 of £1,133.

According to the research by Barclays, just 18 per cent of small firms now say late payment is threatening their survival compared with 32 per cent in 2008. The number worried about the impact on cash flow has also decreased, from 61 per cent to 26 per cent.

But a survey released by BACS found that small and medium-sized suppliers had to wait an average of 41 days beyond the payment date for invoices to be settled in the second half of 2009, an increase of 9.5 days on the first six months of that year.

Calderbridge, Seascale
£52,518 - £64,233
£58,040 - 63,860 per year
Hays CB
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates