New research shows that there has been no real improvement in the speed at which Large companies are paying their suppliers. The research conducted by Accountancy firm Moore has shown that 41 days is the average waiting time for payment. This is the same as it was in 2015.
The past five shows that despite initiatives to curb the problem, no real progress has been made with large companies just ignoring all legislative initiatives.
The continuing problem of payment delays would suggest that Government legislative initiatives to tackle this issue, such as the Prompt Payment Code are simply not working.
The research by Moore also shows that over 15% of the 113,000 UK businesses covered by the study are having to wait 90 days or longer to be paid.
Every year, thousands of businesses in the UK go bust due to late payments by their customers. It continues to be the unacceptable thorn in the side of British Business.
With Coronavirus playing havoc in the UK economy, late payment of suppliers is likely to get worse over the next few months. Some large businesses are already using talk of economic slowdown as an excuse to delay payments even longer.
The Prompt Payment Code was established to improve SMEs’ financial stability by helping them to get payments owed to them more quickly.
The Code requires signatories to pay 95% of suppliers within 60 days; to aim towards 30 days, and to encourage good payment practices across supply chains.
Alarmingly, many Large Companies such as BAE, Unilever and Shell have recently been removed from the code by the Commissioner for failing to adhere to the guidelines.
Duncan Swift, Partner at Moore, said “The data suggests the Prompt Payment Code is not being kept to and stricter enforcement measures are needed to ensure businesses pay all of their suppliers on time. The current ‘name and shame’ tactic is not enough of a stick.”
Businesses in the food supply chain, for example, have been suffering from late payments by large supermarkets for decades.
Since 2013 the Groceries Code Adjudicator has repeatedly called on the UK’s leading supermarkets, that account for over 80% of the market, to change this. However, only 5 of 13 supermarkets are Prompt Payment Code signatories and much of their SME late payment behaviour is masked by their fuel supplies, with oil companies typically being paid within 5 days of delivery. At any given time, the Top 4 supermarkets alone currently have debts due to suppliers over 30 days old of c.£4bn.
Other sectors that have often struggled with late payments include the construction sector, a problem that has contributed to the sector’s remarkably high rate of insolvency.
Moore says if businesses don’t receive payments on time, they might be forced to write off those invoices as bad debt which many cannot afford to do. Slow payment also restricts cash-flow and means businesses may not be able to pay their own bills.
Swift adds “SMEs are under extreme financial pressure, with many concerned that they simply do not have enough cash to meet upcoming costs, such as rent and payroll.”
“This pressure is particularly acute in sectors where lockdown restrictions have had an outsized impact, such as construction and manufacturing.”
“Ensuring the timely payment of invoices could play an important role alongside the Government’s new coronavirus lending schemes in ensuring SMEs have the cash they need to survive this trading period.”
Companies need to have expedited credit control procedures and step by step action plans to ensure Business debts are being paid when due.