Sage’s annual late payment study finds vast majority of firms not being paid within 30 days.
British businesses continue to be blighted by late payments, with nearly two thirds of firms (60%) experiencing having to wait for 60 days or more for payment in the last six months, Sage’s annual late payment study has found.
The research by leading business software and service provider Sage, which spoke to 457 small business owners in the UK, highlighted that late payment had marginally improved compared to 12 months ago, however it underlined the continuing failure in Britain for suppliers to be paid on time.
Almost half (47%) said they had to wait 90 days or more. While this is an improvement from 12 months ago, (in 2014 72% had experienced 60 days or more; 57% 90 days or more) the results point to a worrying trend that continues to hit the cash flow of thousands of firms across the UK.
The direct impact of these late payments includes major cash flow difficulties for one in ten firms (12%, compared to 11% last year) and being unable to pay their own suppliers, compounding the problem (12%). A small numbers of businesses also reported even more serious situations, with some being late paying wages to staff (3%), being unable to pay overheads (rent, etc., 2%), or having their own credit rating downgraded (2%).
With small businesses reporting that larger businesses have extended their payment terms (10% reporting terms extended by 30 days extra, and 7% by a further 45 days) it’s clear that small businesses are facing a threat to their cashflow and continued existence from onerous and over-long supplier payment terms.
The Prompt Payment Code can only go so far. In the most recent survey a quarter (26%) claimed that they had not heard of the Government backed initiative to encourage suppliers to pay on time. On top of this, only 8 percent of businesses described the code as ‘effective’.
“Sadly in the last year there hasn’t been much headway stopping the late payment offenders on behalf of small businesses,” said Lee Perkins, Managing Director of Sage UK’s Start-up and Small Business Division, commenting on the findings.
“It’s disappointing that one in ten small firms are still experiencing major cash flow issues as a result of late payment. Thirty days is long enough, and we would call on businesses of all sizes to ensure they pay their suppliers on time.”