New data released by the Chambers of Commerce has highlighted the negative impact of late payment on small businesses in the UK. 76% of freelance contractors, small businesses and sole traders report being paid late in the past 12 months. The biggest problem these businesses face is not finding enough work or making enough profit, but cash flow problems caused by not being paid on time as expected and agreed.
While late payment affects businesses of all sizes, it’s not such a big problem for large businesses who often agree extended payment terms with their suppliers to offset the squeeze on cash flow. For small businesses, it’s almost impossible to get their suppliers to agree to payment terms in excess of 30 days, indeed for start-ups and businesses in their first year of trading it can be difficult to even obtain credit accounts.
If you go back just a few years the late payment spotlight was very much on the public sector. Successive Governments have done much to tackle the issue and now all public sector organisations including Government agencies, local authorities and the health service are bound to pay invoices issued by small and medium-sized businesses within 30 days.
Just 9% of SME’s reported receiving late payments from the public sector over the last 12 months, compared to 67% receiving late payments from the private sector.