Big firms pay more than half of SMEs late in 2013

 

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Photo Credit: swisscan via Compfight cc

 

New figures from the Federation of Small Businesses reveal that the majority of 8,000 surveyed members received payment from a large firm after the agreed payment deadline over the course of 2013.

 

 In all, 51% – just more than half – of those surveyed had received at least one late payment from a large company over the previous 12 months.

 

This is in addition to some of the other problems commonly encountered by SMEs when supplying big businesses, such as the use of ‘brand power’ to negotiate longer deadlines, sometimes up to 120 days.

 

Among those who had received payment late by a big customer, 29% said their own business growth had been hampered, 32% were forced to pay their own suppliers late, and 34% suffered reduced profitability.

 

John Allan, national chairman of the FSB, said: “We must do everything we can to help businesses and late payment is an issue the government and large businesses must tackle.

 

“Small businesses simply can’t be expected to lend interest-free to their large customers, which is in effect what extended payment terms and late payments result in.”

 

However, not everyone is comfortable laying the blame on the big brands; Philip King, chief executive of the Institute of Credit Management, says all sizes of firms must share the responsibility for prompt payment.

 

In a blog post on the ICM CEO Blog, he writes: “If we’re going to change the culture, it has to be from top to bottom.

 

“Starting with the largest makes sense … but if we’re going to propose measures that increase transparency and encourage responsibility, we must apply them to all.”

 

For small firms facing payment terms of 120 days from big brands, and only 30 days from fellow SMEs in their supply chain, late payments from those larger firms might reasonably seem like the greater insult.

 

But with a 32% chance of late payment ricocheting along the SME supply chain, it is clear that to achieve prompter payments across the board, businesses of all sizes need to adopt best practices.

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