Minister Michael Fallon is on the war path against late paying businesses, naming and shaming the worst offernders in a bid to make sure more FTSE 350 members are signing up to the Prompt Payment Code. Many small and medium businesses have come out in support – hoping the PPC will put pressure on big businesses to pay on time in order to keep SMEs going.
Around 69% of business owners and finance directors in the Hilton Baird Collection Services annual Late Payment Survey think that Fallon is on the right track in threatening to name and shame businesses. Those ignoring requests to join the code are burying their heads in the sand and many businesses think that this needs to stop.
There is widespread support for the PPC – this comes after businesses had to wait, on average, 21 days past the end of their payment terms during 2012. This was only an average figure, and many businesses were often kept waiting beyond this already long period of time in order to get their hands on the money they were owed by customers. This was an increase of 4 days from 2011, showing the problem is getting worse – this highlights the escalating problems with late payment for many SMEs. 13% of businesses were forced to write off more than 5% of their annual turnover over the past twelve months, while 38% classified more than 10% of their debts from customers as over 90 days old.
Managing Director of Hilton-Baird Collection Services, Alex Hilton-Baird, commented, ‘Businesses are firmly behind Michael Fallon’s attempts to encourage the country’s largest firms to improve their payment performance. Whether this will have any effect remains to be seen, however, as it isn’t just large corporates that are culpable. Late payment is occurring right the way through the supply chain.’
‘These numbers are simply unmanageable for the vast majority of businesses, particularly when you take into consideration the range of other pressures on their cash flows at present. In many cases businesses are having to wait more than 60 days, sometimes more, to be paid after providing goods or services. Given this, it is obvious why the economy is caught in a state of flux.