15 April 2010 | Nick Martindale
Small suppliers face increasing pressure on cash flow because of late payment, research by BACS suggests.
The study found small and medium-sized companies had to wait an average of 41 days beyond the agreed payment date before invoices were settled in the second half of 2009; a rise of 9.5 days on the previous half-year’s figures.
Large organisations were named as the worst offenders by 37 per cent of small firms; twice as many as the second-placed group in the list (17 per cent said sole traders and other small businesses were mostly to blame). Government departments and not-for-profit organisations were seen as the main problem in just 6 per cent of cases.
Thirty-nine per cent of suppliers said customers gave cash flow as the main reason for late payment – an increase of 9 per cent from June – while 7 per cent blamed the economic downturn in general.
The Forum of Private Business (FPB) warned buying organisations were risking their own security of supply by putting the livelihood of suppliers in jeopardy.
FPB spokesperson Phil McCabe said: “Late payment is a huge problem for small businesses and it’s highly disappointing to hear that small firms are having to wait even longer to be paid.
“Late payment is frequently cited as the number one problem facing our members, eclipsing even taxation and regulation. With its damaging impact on a company’s cashflow, it can cause a perfectly viable and successful firm to fold.”
The service sector was the worst affected, with 59 per cent suffering from late payment, closely followed by manufacturing (56 per cent) and distribution (53 per cent).