Late payment issues still putting SMEs at risk

Problems with late payments, often a contributing factor for businesses entering administration, are still proving to be a problematic issue for small businesses in the UK.

New data from Dun & Bradstreet (D&B) found that the rate at which the Government pays its suppliers on time has slowed by 3.5 percentage points since the end of last year. This is the poorest performance seen since September 2011 and poses a serious cash flow issue for companies struggling to keep their heads above water in the protracted economic slowdown.

But while Government contractors may be facing difficulties, the research showed that in actual fact, all other UK sectors showed improved payment times over the past year. Even so, there was still a notable difference between large and small companies' payment rates, with large companies almost twice as likely to pay late than SMEs. The figures showed that 30.9 per cent of bigger firms paid late, compared to 15.1 per cent of SMEs, perhaps due to their understanding of the impact late pay can have on cash flow.

In some cases late payment is threatening a firm's survival due to the pressure it puts on a firm's finances. The previous Government put a system in place entitled the Prompt Payment Code in 2008, which aimed to help small suppliers recover money they were owed. However, take up was low due to the fact that many firms were unwilling to effectively 'name and shame' their customers, in case they damaged their working relationship.