April 25, 2014 - Rachel Miller
The continuing culture of late payment remains a deep concern for many small businesses, according to the latest research from the Forum of Private Business (FPB).
In its latest banking and finance survey, 23% of members reported an increase in late payment over the past year compared with just 3% who reported a decrease. 29% have also seen an increase in the average number of days beyond the deadline that a payment is made, whilst 8% reported a decrease.
While the improving economic situation means the number of businesses seeing late payment as a serious problem has remained static, small businesses are still keen to see more measures to tackle the issue. The poll found that 39% of businesses would like to see prompt payment better promoted, 37% would prefer to pay VAT on money that has entered their account rather than when an invoice is submitted, and 36% want to see persistent late payers barred from government contacts.
Phil Orford, FPB chief executive, said: "Improving cash flow is the likely cause for late payment issues remaining static, despite lengthening payment terms. However, upwards of £30 billion remains tied up in late payments, costing a typical small business 130 hours a year to chase and meaning that a third are forced to seek external finance to cover the gaps in cash."
The government is currently considering responses to a recent late payment discussion paper which put forward ideas for tackling late payment, including the reintroduction of compulsory reporting of company payment terms and practices and annual checks for Prompt Payment Code signatories.
Orford said: "It is essential that government uses the recommendations to introduce effective measures and accepts that it not only has a responsibility to play in this area but also that its increased action can also act as an important catalyst for better payment practices."