Despite the efforts from Westminister and within the business community itself, late payment still lingers. Large businesses are still paying their suppliers late and late invoices are driving more small businesses into financial distress. The collapse of Carillion earlier in the year brought the issue of late payment into the spotlight. Initially perceived as an issue that only affected small business, bad payers have been discovered to come in all shapes and sizes. The government has implemented numerous measures but none have facilitated much of an impact and trade bodies are subsequently getting more frustrated.
New research from cloud accounting software company FreeAgent has revealed that UK-wide, just 52 per cent of invoices sent during 2017 were paid on time or within three days of their payment deadlines. A further 26 per cent of UK micro-businesses said that the longest they have had to wait to get paid by a client was three to six months, while 10 per cent has had a client who has never paid them at all. Not only do these findings illustrate the prevalence of late payment, but most worryingly they also highlight the complacency committed by the so-called victims of the late payment culture.
At the Credit Protection Association, many of our Members have fallen prey to late payment. While most have sunken into financial distress as a result, bringing us into the fray is a strong first step. The reason for the ineffectiveness of the government’s Prompt Payment Code was because it relied on small businesses to step forward, which many are reluctant to do so. Future government measures should take this timidity into account, and penalise the perpetrators rather than put the pressure on the victims.
The issue of late payment has become so prevalent that the UK government appointed a Small Business Commissioner in a bid to drive a cultural change in payment practices to ensure small businesses are treated fairly. Commissioner Paul Uppal has been allocated an annual budget of £1.4million to fulfil his remit. While it is a nationwide initiative, Uppal has identified the West Midlands as an area of priority.
Ed Molyneux, CEO and co-founder of FreeAgent, said: “While late payments are an issue across the UK economy as a whole, our research reveals just how widespread it is within the freelance and micro-business community.”
“Around half of the invoices sent by micro-businesses in the UK get paid late, and there are certain areas where the issue is considerably even worse. Even in Manchester, where late payment is least prevalent, there are still many businesses who aren’t being paid on time. Some of these late payments go way beyond a week or two, with some taking months to settle invoices, or even not paying at all.”