FSB report shows stopping
late payments could save 50,000 small businesses
THE Federation of Small Businesses
(FSB) has published a comprehensive report looking at how small firms and the
wider economy are affected by poor payment practice.
FSB's report:- 'Time to Act: The economic impact of poor payment practice,'
has found that existing policy interventions have had no discernible effect on
tackling problems surrounding the UK's poor payment culture over the past 5
years. Small businesses report that, on average, 30% of payments are typically
late; compared with 28% in 2011.
The impact of poor payment on small businesses can be devastating. The report
shows that 37% have run into cash flow difficulties, 30% have been forced to use
an overdraft and 20% say profits have been hit. At the extreme end, late
payments and resulting cash flow difficulties have caused businesses to fail. In
2014, if payments had been made on time and as promised, 50,000 businesses could
have been saved, growing the UK economy by £2.5 billion.
Chris Burgess, Chairman of FSB Merseyside, West Cheshire and Wigan, said:-
"There is a real danger that we are creating a business culture in the UK
where it is acceptable not to pay SME's on time. All too often large companies
ride roughshod over their small suppliers by not paying them on time or in full,
which has a chilling effect right across the economy. It's distressing to hear
from our members that, in 2016, the average value of each late payment now
stands at £6,142. Small businesses have to run a tight ship as far as their cash
flow is concerned as they struggle with increasing business costs and an
uncertain domestic economy They should not also have to struggle with the
stress, time and money required to chase overdue payments from big businesses."
FSB highlighting the good and bad practice we find, making the boards of larger
companies explicitly own and be accountable for the impact their chosen payment
strategy has on their suppliers.
Government should devote an element of its upcoming Corporate Governance drive
to:- 'supply chain respect', alongside measures on executive pay
and workers... Also the Department for Business, Energy and Industrial Strategy (BEIS) should end
the delay in appointing the Small Business Commissioner pledged in the Queen's
Speech 18 months ago, and ensure this office has a specific remit to tackle
supply chain bullying within its 'name and shame' powers...
The Chartered Institute of Credit Management and BEIS should give real substance
to the Prompt Payment Code (PPC) through a:- '3 strikes and you're out'
penalty system that tackles repeat offenders, and by making the PPC mandatory
for the largest firms.
Chris Burgess continued:- "Our report is further evidence of why it is so
important, from an ethical and economic point of view, to address this issue
head on. Payment culture is set at board level and supplier interest must be
represented at the top of the chain. It's something that CEOs and board members
in big businesses must take responsibility for. Big businesses should respect
the supply chain and stop using smaller businesses as a credit line by delaying
payments and applying bullying tactics."