‘Naming and shaming’ big companies that make a habit of paying small suppliers late may have the desired effect of forcing the worst culprits to change their ways. Let’s hope so, because nothing else – not even Government-backed initiatives like the Prompt Payment Code – has made much of an impression on a culture that is both incredibly damaging to the UK’s 5.7m-strong SME community and spreading rapidly to the point where this behaviour is now almost accepted as the norm.
A report from invoice specialists at Business Expert reveals that only 4.7% of UK businesses pay all their invoices within 30 days, which inevitably has a negative knock-on effect. If SMEs don’t receive the money they’re owed, they can’t pay their own bills, including salaries, because many don’t have the financial muscle or flexibility to absorb the delay. Put another way, they don’t have anyone they can bully to ease their own cash flow pressure.
The Business Expert report names 35 companies as being the worst offenders. There are some surprising names on the list: E.ON, for example, evidently takes an average 118 days to pay its bills, with only 37% of its suppliers receiving their money within the agreed terms. Thomas Cook takes 88 days to pay with only a fifth paid on time. Aptly named WorldPay Ap Ltd pays only 6% of its suppliers on time.
The report makes sorry reading especially since, if the problem could be solved, it would give an estimated £2.5bn annual boost to Britain’s economy – not to mention make the lives of owners of smaller businesses a great deal more comfortable.
The Government’s recent move to introduce new laws in 2019 that will allow SMEs to raise invoice finance against unpaid invoices, regardless of contracts that try to prevent them from doing so, was rightly welcomed as a step in the right direction. However, while we all hope that bigger companies will start to treat their smaller suppliers more fairly, the fact remains that small businesses still need to take responsibility for their own cash flow. While we wait (possibly in vain) for this change of heart, it means that SMEs need to factor longer payment cycles into their budgets because, for now, that is the reality of the market environment.
CaFE software has been designed specifically for the purpose of providing business owners with an accurate and automated view of their likely future cash position, allowing them to take pre-emptive action to counter any problems and keep control of their finances.
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