The late payment of trade invoices is threatening the profits, growth and even survival prospects of small firms, but few use formal procedures to tackle the problem. This is according to the findings of a research report by Graydon UK, working in partnership with the Forum of Private Business.
The survey, which canvassed the views of 500 UK small businesses, revealed that 51% of companies cite the late payment of trade invoices as a problem. Almost a quarter (23%) of these companies subsequently indicated that late payment is a serious problem, with 16% saying they have almost been put out of business as a result.
Meanwhile, 56% of those respondents not paid on time have, in turn, been forced to pay their own suppliers late, and 45% reported that late payment has eroded their profits. Almost a quarter (23%) asserted that late payments have undermined their ability to invest in growth through innovation.
The research also shows that businesses which embrace credit control procedures of some form are significantly less likely to suffer as a result of late payment. Less than half (44%), however, employ formal credit control procedures, with 38% instead relying on a mix of formal and informal processes, and 16% juggling payments on an ad-hoc basis.Only a third (33%) of respondents offer prompt payment incentives, and just 30% use existing legislation to charge interest on late payers, while 40% use cashflow management software. In addition, debt collection agencies are employed by 42% of respondents, and 43% keep a reserve in the bank to offset late payments.