Despite legislation being in place to enforce fair payment practices, more needs to be done in order to ensure big companies treat their smaller suppliers fairly, according to the Federation of Small Businesses.
Mike Cherry, national policy chairman at the FSB, says the EU Late Payment Directive sets out clear limits on acceptable periods for payment, but that the UK’s voluntary Prompt Payment Code lacks the power to enforce these rules.
“The Prompt Payment Code needs to have more power and authority to help the smaller firms,” Mr Cherry said. “For example, ensuring the largest businesses spell out their payment terms.
“The EU Late Payment Directive is very clear that if payment terms exceed 60 days, they must explain why. It’s time for big companies to take their responsibility to pay on time seriously.”
His comments followed the publication of recent figures by payments processing service Bacs, which found that UK businesses are now shouldering a communal late payment burden of £46.1 billion.
SMEs may be owed less each, but as they account for the majority of the UK’s total business landscape, those with fewer than 250 employees are together waiting on £39.4 billion in overdue payments.
Among those not experiencing difficulties, 71% said robust invoicing procedures helped, and 51% cited payment services such as Bacs Direct Credit as being of further help in reducing delays.
But Mr Cherry said the figures still show the “major headache” many firms are experiencing due to late payments.
“Small firms simply can’t be expected to lend interest-free to larger companies, which late payments and extended payment terms force them to do,” he added.
He called on the government to take action against late payment by reinforcing the Prompt Payment Code and EU legislation as part of the Small Business Bill.