2011 saw the level of bills paid late by companies soar to 25.6 working days past the original terms for payment. This is a large increase compared to the number of days in 2008 and 2010, which were 21.5 and 22.5 respectively. Original payment terms are typically between 30 and 90 days, although companies are still not paying on time.
According to recent research by Experian, the average number of days waiting for payment following agreed payment terms is 34 for larger companies who make late payments to their small suppliers. Small businesses typically pay their suppliers between 20 and 22 days later than agreed. The chief executive of the Institute of Credit Management, Philip King believes that the government must legislate to ensure companies comply with a code of practice for payments, either on a voluntary basis or by “coercion”.
The government is also being pressured by the National Farmers’ Union, Lloyds and the Forum of Private Business to tackle the increasing problem of late payments. Mark Prisk, business minister has pledged to take action, and a campaign backed by the government is due to be launched. The “Get Paid” campaign was originally due to be launched by the end of January but has been postponed. Prisk said:
“We are very mindful that cash-flow is key in any business and any unreasonable withholding of payment can be critical.”
The owner of Carters Ceramic Designs, Tony Carter has fallen foul of late payments previously. He said:
“When you are a small company working with big companies the reality is that, whatever our terms of trade are, their terms of trade will always supersede them.”