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Cabinet minister Francis Maude has insisted that primary government contractors pay their smallest suppliers promptly. Large contractors are paid on time by the public sector, usually within five days. However, Small and Medium Enterprise are often left waiting for payments and chasing invoices at the bottom of the payment chain.

The minister asked leading suppliers to the state to pay their sub-contractors within 30 days. This was to be repeated down the chain, ensuring that many small businesses wouldn’t have to spend their time chasing payment of invoices. Primary contractors have assured Mr Maude that the smallest of their subcontractors are receiving payment within 30 days of their invoice. According to research carried out by global payment organisation BACS, large businesses are the worst with regards to paying SME’s promptly, although the last six months of 2010 shows that the number of small businesses who were paid late fell to six percent.

A spokesman from the Forum of Private Business stated that targets on prompt payments were usually adhered to at the hgiher end of the contractor chain, but smaller companies had to wait for their money, with an average time of 39 days. The head of marketing at BACS, Mike Hutchinson said:

“Late payment is causing the UK’s small businesses to use up millions of man hours in chasing invoice payment.”

He added:

“Cash flow is an essential business priority, particularly in a period of economic uncertainty.”

Although Francis Maude has insisted on prompt payments, it seems unlikely that the minister has the power to enforce payments to small businesses at the lower end of the chain, making good accounting skills even more essential for SME’s.

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