ALMOST three-quarters of small firms say they have been paid late in the last year - and the majority of tardy payers are other businesses.
Most of the late payments – 77% – were from the private sector, although 18% of those quizzed by the Federation of Small Businesses (FSB) said they were still waiting for public sector payments.
But the Government’s commitment to pay all invoices to small firms within 10 days as part of the Prompt Payment Code appears to have improved payment times.
John Walker, the FSB’s national chairman, said: “There are always going to be companies that pay late, but there are steps businesses can put in place to make sure they don’t fall foul of the issue. We are pleased the Government has stepped up to the Prompt Payment Code – but there is more work to be done.
“Every penny counts and for small businesses a late invoice can mean not being able to pay their staff.
“We need to see all businesses ensuring they make payments on time if the private sector is to get on with the job of strengthening the recovery.”
Because small firms do not have the same cash reserves to act as buffers which large companies can access, late payments tend to start a vicious circle. Almost four out of 10 of those questioned by the FSB said if they are paid late, it delays when they are able to pay own their suppliers.
The survey showed 43% were waiting for payments of up to £4,999. In the last year, more than half had been forced to write off invoices of up to £9,999 because of non-payment. In the construction sector, 6% of small firms said they had written off £35,000 or more.
The FSB wants the Government to ensure all public agencies follow its lead and pay small firms within 10 days; that all contractors used by the public sector pay their sub-contractors within the same time; and all private sector companies used by the public sector sign up to the Prompt Payment Code.
More than half of small firms say they spend up to six hours a week chasing up late payments.
The FSB said businesses should put a contract in place confirming payment times and listing penalties, such as interest charges, if the payment is late. Options include offering a discount for prompt payment, depending on the relationship between the businesses, and asking for payment up-front or a deposit before work begins.
It also advised firms to talk to the buyer before shipping goods to ensure they are aware of the payment terms.