Small companies waiting on £35bn in late payment

Unpaid bills to small suppliers are now at the highest level in almost five years, according to Bacs, with combined debts up by almost £2bn compared to the first half of last year.
Bacs, which runs Direct Debit, said the average company is waiting almost 30 days longer than agreed payment terms to have their invoices settled.

With large businesses insisting on payment terms of as much as 120 days, many suppliers could be waiting up to five months to be paid for work.

The average small firm had £45,000 worth of unpaid invoices at the end of 2011, Bacs said, up from £39,000 in the first half of the year.

Big businesses are least likely to pay suppliers on time, behind the public sector, small and medium-sized firms and individuals, Bacs added.

A report by the all party Parliamentary Small Business Group published this week recommended that all companies supplying the public sector should be forced to sign the ‘Prompt Payment Code’, a voluntary scheme which promotes good payment practice says The Telegraph.

However, the report also noted that there is currently “no adequate enforcement” of the Code so “alternative solutions” may have to be considered.

Rules which allow companies to charge interest on unpaid bills are rarely used and the Government has admitted that late payment legislation “hasn’t worked”.

Philip King, chief executive of the Institute of Credit Management, said Government should pressure big business to improve their payment practices by only awarding public sector contracts to firms which “can demonstrate a genuine commitment” to good payment practices.