Late payments costing small firms billions

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The worsening problem of late payments is costing smaller firms billions of pounds a year, the Government has been told.

The Federation of Small Businesses (FSB) took their complaint to Downing Street yesterday to discuss the “deteriorating” payment culture in British industry.

Recent FSB research revealed that almost one in five small businesses had been subject to some form of poor payment tactics.

FSB chairman John Allan said the federation was receiving evidence of supply chain “bullying” across the food processing and other industries.

“We are finally beginning to see progress in highlighting poor payment practices with Government, opposition parties and big business recognising something has to give. The issue will not go away by itself and we hope today’s meeting will lead to action to resolve the failing supply chain.

“If we look at late payment, it’s a massive problem for small businesses costing them tens of billions of pounds each year. If you are waiting for a payment from your biggest client, it means you can’t buy in new machinery, hire new staff or in some cases even pay your own employees.”

CBI director-general John Cridland said: “The vast majority of businesses know that good supplier relationships are important for success, but there is still too much bad practice out there that must be challenged.

“We need to encourage and foster a prompt payment culture as it supports growth and jobs.

“We want to see companies publishing simple information online and in their annual reports about their payment practices because it shines a light on this important area and makes good business sense from an investor and supplier perspective.

“But we also need to make sure we steer clear of creating accidental perverse incentives that might encourage companies to extend their payment terms to reduce the proportion of those paid late.”