Efforts to eliminate the problem of late payments in the small to medium-sized enterprise (SME) sector is not working, according to a new study by invoice specialists Tungsten Network.
The Prompt Payment Code Advisory board was set up to support and advise the Government on strengthening the Prompt Payment Code, which encourages businesses to pay their suppliers within 60 days, and move towards 30 days as a norm.
As part of their drive to eliminate late payment problems between SMEs and suppliers the code was strengthened in March 2015 and a compliance board was established to ensure that terms were being met. This will become a formal requirement for all members as of this year.
However, despite these changes, the survey from Tungsten Network has revealed that 12 per cent of the UK’s 5.2 million SMEs still have to wait 90 days or more to get paid under their customer’s payment terms, with a further three per cent not being paid within 120 days.
In response to the study, Tungsten’s CEO Rick Hurwitz said: “Too many SMEs struggle to span the working capital gap between completing a job and getting paid. After paying out their costs, they often have to wait too long for their customers to pay them.
“From our daily experience of helping SMEs better manage their cash flow, we know these extended payment terms are seriously impacting their ability to invest in growing their businesses.”
Small Business Minister, Anna Soubry, recently announced plans under the latest Enterprise Bill to tackle payment problems faced by SMEs by appointing a new commissioner to deal with complaints.
She added: “The Government can play a role in helping span the financial mismatch between small operators and their larger customers by seeking consensus to strengthen the Prompt Payment Code, gaining buy-in from companies of all sizes.”
Meanwhile, Philip King, Co-Chair of the Prompt Payment Code Advisory Board and Chief Executive of the Chartered Institute of Credit Management has said that the Code has helped to elevate the late payment debate to the top of the boardroom agenda.
“It has already proven its effectiveness, with 100 per cent of all challenges successfully securing quick payment for the supplier and/or, in many cases, resulting in changed processes to improve the way in which supplier payments are managed,” said Mr King.
“What is vital, however, is that the Code is given greater visibility, publicity and support to encourage more people to engage when things go wrong, and to highlight the examples of good practice that are already prevalent. The mechanism exists but it needs to be used more.”
At Milsted Langdon, we understand that late payments can have a significant impact on the cash flow of your business. Our debt recovery specialists can assist credit controllers to collect difficult or long-outstanding debts, without the need to resort to legal action. For further information, please contact us for a fast and effective solution.
Link: Tungsten Network Study