THE late payment culture is putting the very survival of some small firms in question, according to a report into the issue.
Profits, growth and ultimately whether a firm will continue to trade all hinge on being paid in time, according to a survey by commercial credit referencing agency Graydon UK and the Forum of Private Business (FPB).
It found more than half – 51% – of the small firms quizzed considered the late payment of trade invoices to be a problem, with 16% reporting they were almost put out of business as a result of tardy payers.
Small firms also said late payments had a domino effect, with 56% of those that were not paid on time then being forced into paying their own suppliers late.
Graydon UK’s Gordon Skaljak said: “The current economic climate makes it more important than ever that companies clearly understand the risks and opportunities associated with their operations. This includes identifying the cash flow and other risks triggered by the late payment of trade invoices by customers.
“Companies cannot achieve sustainable growth if they aren’t paid on time consistently. This is why having a formal credit management process based on reliable, accurate customer payment behaviour information is essential for businesses who want to transact with confidence and fulfil their sustainable growth potential.
“But while credit reference agencies such as Graydon UK are business counsellors on managing this risk, the business community and the Government must join forces to protect companies by stamping out the UK’s late payment culture.”
Firms said there were steps they could take to reduce problem, but not of those questioned were being proactive and taking them.
Almost all – 97% – believed submitting invoices promptly was the best way of ensuring customers paid up on time, followed by phone contact with a customer after an invoice has been submitted (79%), using credit checks (76%) and refusing to complete work in the future (61%).
FPB chief executive Phil Orford said: “We need to do two important things – first, communicate to business owners exactly what they can do proactively to minimise late payment, including putting in place robust cash flow management procedures and invoicing properly and on time, then we need to provide the support and services they need to make tackling late payment a standardised business process.
“Second, we need to persuade large corporations to embrace paying their suppliers on time and in full, avoiding the temptation to impose damaging, retrospective changes to terms and conditions, so that prompt, proper payment washes down the supply chain.
“These are the aims that are squarely in our sights and we are committed to working with the Government and other agencies in order to achieve them.”