March 12, 2014, by Kelly Cookson

Late payments and small businesses

In the January 2014 Business Barometer survey, our panel of UK small business owners and business advisers were asked about the frequency of late payments made by customers as well as the businesses’ ability to pay suppliers on time.

The responses from small business owners were as follows:

Over the last six months, how has your situation changed with regard to payments made by customers?
Significant increase in delayed payment	5.6%
Slight increase in delayed payment	23.9%
Unchanged	59.2%
Slight increase in prompt payment	5.6%
Significant increase in prompt payment	1.4%
Not applicable	4.2%

 

Over the last six months, how has your situation changed with regard to payments made to suppliers?
Significant increase in delayed payment	0
Slight increase in delayed payment	8.5%
Unchanged	81.7%
Slight increase in prompt payment	7%
Significant increase in prompt payment	0
Not applicable	2.8

 

UK business advisers were also asked whether their clients’ customers were paying promptly and about their credit arrangements vs those of their suppliers.

Over the last six months, to what extent have clients seen an increase in delayed payment from other firms?
Significant increase in delayed payment	7.4%
Slight increase in delayed payment	28.7%
Unchanged	58.5%
Slight increase in prompt payment	3.2%
Significant increase in prompt payment	0
Not applicable	2.1%

 

Overall, compared to credit arrangements given by your clients’ suppliers, to what extent are their credit terms to their customers more generous?
Much more generous	2.1%
More generous	17%
The same	62.8%
Less generous	16%
Much less generous	2.1%

 

Panellist Kevin Rogers of Quality Solicitors Wilson Browne commented on his firm’s debt recovery client base: “Previously they were worried to pursue debts, perhaps for cost or concern about alienating customers. More recently they have become hardened to the realisation that cash flow is king and a slow payer may be okay but a bad payer is not. We are also seeing clients doing a little better having the confidence to spent a little more on the legal process to protect that cash flow. Until our advice is given there is little knowledge of the late payment regulations that can provide assistance.”

Adviser panellist, Max Walker of Markwel Associates Limited, commented: “The question of late payments and credit terms is complicated with small business. For example if they are dealing with a large company they are expected to settle their account in 28 days, but large companies have ‘Settlement Times’ often of 90 days or even 120 days. Small businesses cannot afford these sort of waiting times and this places a burden on them as they have to chase their other customers to make up the cash lost with large companies. This is one of the main reasons small companies do not bid for work from large organisations.”

The UK Business Barometer and UK Business Adviser Barometer surveys are ran by the Haydn Green Institute for Innovation and Entrepreneurship. The results of the surveys are instantly processed and posted on their respective websites: www.ukbb.ac and www.ukbab.ac

Businesses and advisers wishing to contribute as panellists on the project can register via the websites.

The UK Business Barometer has a group on LinkedIn and can be followed on Twitter @UKBB_UoN

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