Because half of smaller suppliers continue to receive late payments from their clients, the government is being urged to step up efforts to crack down on late payers.
Data from the Federation of Small Businesses reveals that between April and June, half of the 1,300 small business owners and sole traders surveyed for its quarterly research reported being paid late, and one in five said the problem was getting worse. This comes as two important initiatives to address the issue stall.
Late payments are estimated to cost small businesses, which employ more than 10 million people, an annual total of over £50 billion, equivalent to 7% of the UK’s GDP.
“There must be a mix of good and negative steps to have a significant impact on the UK’s bad payment culture,” said Craig Beaumont, the federation’s chief of external relations.
However, the government does not dispute that poor payment practices remain a significant problem.
Large corporations are required to disclose their payment performance. However, a professional organisation called the Association of Accounting Technicians has criticised this as a “wholly erroneous and inadequate” solution to a “multibillion-pound problem.”
Numerous businesses disregard the regulations; the data may not be accurate; and few suppliers even know about the policy, let alone look at it. It stated that the issue of late payments has simply gotten worse rather than better.
Small businesses have now begun looking at alternative solutions to tackle the rising problem of late payments.
Alternative sources of finance have become a more effective tool for SMEs. Businesses have been able to access additional working capital and offer liquidity thanks to invoicing finance solutions like invoice factoring, which have been crucial at this time.
Any firm that wishes to discharge money from its invoices more quickly, increase cash flow, or spend less time chasing down late payments may find that invoice factoring is a smart option.