Almost half of small and medium-sized businesses have struggled with late payments in the last year, according to research by the Institute of Directors (IoD).
Of the 787 business leaders surveyed, 48% have faced issues with late payments since April 2017.
About 3 in 10 (31%) said this was the result of an “excessively bureaucratic payments system” in the company being invoiced.
Others noted a disparity between the practices of smaller and larger businesses, with 23% claiming larger firms in their supply chain used “grossly unfair” terms or practices.
This follows the launch of the small business commissioner’s complaints handling service in December 2017, which was intended to help businesses resolve payment disputes.
However, only 1% of respondents to the IoD survey thought mediation by the small business commissioner would be the best way to address late payments.
Quote from Nigel Holland
“Chasing late payments has its negative effects on businesses. Late payments can mean that the SME’s may have to rely on bank overdrafts, which comes with high interest, thus increasing the costs within the business and therefore revenue.
Also, a great deal of time and money can be spent on chasing the debtors making the business less productive, and also meaning there will be less focus on other aspects within the business. Not only will this make the business less productive, but due to a lack of revenue, SME’s may find it difficult to pay their suppliers thus resulting in the chances of them having to pay their creditors late.
This can damage their relationship with their suppliers, which can damage future beneficiaries with them such as discounts.
In my opinion, there should be stronger methods of claiming payments from debtors in order to avoid late payments and I encourage the government to publicise the options that are out there in order to claim them.”