Research shows the smallest firms are made to wait the longest for payment – and the wait is getting longer, compared with immediately before the credit crunch.
Figures from the Asset Based Finance Association put the average wait for payment at 71 days, up from 64 days before the recession hit in 2008.
But this length of wait is only expected of the smallest firms, with turnover below £1 million.
Among the biggest firms, with turnover in excess of £500 million, payments are made in just 48 days, still longer than the 30 days most would probably prefer, but some 23 days faster than to small firms.
Jeff Longhurst, chief executive of the ABFA, said: “It is alarming to see how much longer SMEs are waiting to receive payment compared to just a few years ago.
“It is putting some SMEs in financial difficulties, and it certainly makes it more difficult for SMEs to make the investments in staff and equipment they need to respond to the recovering economy.”
ABFA adds that the lengthening delays on payments to small firms have come despite the introduction of the Prompt Payment Code, a voluntary initiative that has been widely criticised as being relatively toothless.
For instance, although nearly 1,700 companies throughout the UK have signed up to treat their suppliers more fairly, there is no obligation to join the register, or any sanctions for those that fail to stick to their commitments.
As a result, the Code effectively has no concrete impact on small firms and their ability to expect payment within 30 days – or any sooner at all than was previously the case.
Mr Longhurst added: “It’s more important than ever that these businesses are aware of the options they have to get around the roadblock of late payment, and free up the funds they need more quickly.”