Major businesses are ignoring the plight of SME’s by failing to meet more than half of payments on time.
A survey conducted by the Federation of Small Business on over 8,000 businesses has brought to light the feckless attitude of the bigger companies where deadlines are concerned.
FSB are now pushing for the Government to tighten the Prompt Payment Code so that it is easier for businesses to complain about the larger firms dictating the market.
The bigger firms are so used to throwing their weight around that only 1 in 10 (12%) of SME’s which encountered late payments actually charged interest, due to not wanting to rock the boat on potential contracts in the future.
Some companies were found to be extending payment dates by as much as 120 days which could potentially all but dry up an SME’s lifeblood – its cashflow.
The damaging knock on effects meant that nearly a third of the companies pooled, encountered reduced profitability, consequent late payments to their suppliers, and a restriction in business growth.
Companies are turning increasingly to contract financing solutions, of which Sonovate is the leader in the recruitment sector, to alleviate cashflow problems and the responsibility of chasing up and processing difficult late payers.
Calls have also been made to re-launch the Prompt Payment Code website and clearly define its terms and grounds to challenge – with those companies signed up to the PPC being made to adhere to its conditions.
The FSB want all signatories of the code to state their maximum and average payment terms in order to ensure some accountability exists.
“As the economy gets stronger we must do everything we can help businesses and late payment is an issue the Government and large businesses must tackle” John Allan, National Chairman of the Federation of Small Businesses, continued “This is as much a policy issue as it is a cultural problem within UK business.”