Companies do not take late payment seriously and legislation is needed to address the issue, according to a campaign group.
Terry Corby, chairman of Good Business Pays (GBP), said “the law needs to be strengthened” to protect small businesses after the group found only four FTSE 350 companies paid suppliers within 30 days.
He accused big companies of not taking the matter seriously, and said late payments were compounding the country’s ongoing supply chain issues.
“Big companies don't take the issues of paying fast or paying on time seriously,” Corby said.
“If you look at all of the problems we're having at the moment, many of those problems are going to fall on small and medium-sized enterprises to try and fix.
“If they haven't got the cash in the bank, they can't bring the employees back from furlough or get the new equipment they need, and big companies aren't taking that seriously. They don't see it as an issue in the same way that they will see other sustainability measures.
“There's a big difference between the wrong and right of this, and it's purely down to a matter of choice and leadership as to whether a company pays fast or slow,” he said.
The government has introduced a small business commissioner to tackle late payment and the Prompt Payment Code, however Corby said the code is only voluntary and current measures do not go far enough to protect suppliers.
Corby pointed to research by the Federation of Small Businesses that found 50,000 small businesses close every year due to cash flow problems.
GBP has handed Faster Payer Awards to Michael Page, United Utilities Water, Aviva, and Severn Trent Water as the only FTSE 350 companies to pay suppliers within 30 days. Those companies had also paid 95% of invoices on time in the past 12 months.
In separate research GBP named and shamed the slowest payers.
GBP has found the average time companies take to pay suppliers has increased from an average of 36 days pre-pandemic to 37 days.
Corby said while this might not seem much, “it’s a movement in the wrong direction”.
“When it comes down to it, companies have used the pandemic as an excuse to extend payment terms, so it has gotten worse.
“The Federation of Small Businesses estimates that this year alone 250,000 small businesses will go out of business as a result of the combination of both Covid pressures and post-Brexit pressures. You don't want to be adding to that by treading on the oxygen pipe of money to small companies,” he said.
Greater transparency over payment times can help put the power back into the hands of suppliers, who can then make more informed decisions over which companies to supply. Corby said small businesses were using the organisation’s league tables to decide which companies to work with.
Faster payments will lead to healthier supply chains, he argued.
“When everybody works in partnerships and everyone is paid on time, supply chain issues are going to be solved faster, but they can't if someone along the chain has got no cash.”
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