Figures released by the Asset Based Finance Association (ABFA) have revealed that small businesses are forced to wait longer than large businesses to receive payment.
Businesses with turnovers of less than £1m wait an average of 71 days for payment. That is 23 days more than businesses with turnovers of £500m and above, who wait an average of 48 days.
Many SMEs struggled during the recession as large companies took advantage of their strength by lengthening the amount of time they took to complete payments.
The government responded by urging big businesses to sign up to the Prompt Payment Code, in which firms volunteer to pay in accordance with the contract and not attempt to change payment terms retrospectively. Nearly 1,700 large companies in the UK signed up to the code.
However, SMEs still have to wait a week longer for payment than they did before the recession began. In 2006 they waited an average of 64 days.
Jeff Longhurst, chief executive of ABFA, said: “These figures highlight the relationship between some big businesses and their smaller suppliers has become even more unbalanced since the credit crunch – and efforts to address this have not had a great deal of impact.
“It’s alarming to see how much longer SMEs are waiting to receive payment compared to just a few years ago and it’s putting some SMEs in financial difficulties.
“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.”
Firms affected by late payments should seek legal advice as soon as possible. Solicitors can use several measures to ensure early settlement of outstanding invoices.
Please contact Jonathan Clarke for more information about the issues raised in this article or any aspect of debt collection and credit control.