Call for legislation amid late payments and cash flow problems escalating

More than two years after the introduction of a code of conduct (The Prompt Payment Code) to crack down on late payment in business a new survey shows that the problem is actually getting worse.

Now industry experts are calling for legislation and sounding warnings that an escalating culture of late payment is holding back the UK’s economy and failure to act now could de-stabilise the already laboured and fragile road to recovery.

According to a survey of credit and finance professionals, more than two thirds of leading international and UK suppliers are being paid late by their customers.

Sheffield Hallam University Business School surveyed more than 500 credit and finance managers from a range of companies in the manufacturing, distribution and service industries and concluded that the voluntary Prompt Payment Code is clearly not working and that new we legislation should be mooted to make businesses pay their suppliers on time.

The Credit Services Manager at of Europe’s leading distributors of industrial engineering products Brammer, Betty Fleming took part in the survey and she had this to say:

“Extended payment terms are not good for the economy – money isn’t moving around quickly enough. Some smaller companies who aren’t cash rich will be required to try to borrow more from their bankers and/or financiers and may find this impossible, more so when interest rates rise – they could easily be forced out of business.”

Taking her point in case, the current level of ‘late payment’s’ owed to UK small business stands at a staggering £24bn. This equates to 25% of the total annual NHS budget being owed today alone, to UK’s small businesses. This figure isn’t the amount in total invoices but just the portion of the monies due to UK small businesses that is past the due date.

When we look at the North West, recent research by Lloyds TSB found that more than one in three (38%) of North West businesses have reported suffering from cash flow problems in the first half of 2011 alone, and two in three of those (68%) are citing late payments as the main cause.

Although the North West was slightly higher than the national average which is currently 63% of firms with cash flow problems blaming late payments as the cause the national average is only a few percentage points lower and for want of a better word, the late payment problem seems somewhat one of an epidemic.

Cash flow problems are a killer of businesses small and large, national and international so if any of the issues highlighted in this debt focus blog post are of a concern to you, get in touch and start reducing your debtor days.

Debt Recovery and Outsourced credit control are two vital services at CCDR . Credit Control, sometimes called business credit management manages credit lines offered to customers, reviews creditworthiness and ensures that payments / customer invoices are collected on time. Commercial Debt Recovery is generally the last line of defence as much can be done to avoid this outcome. However, time is usually the critical factor.

Get in touch with Liverpool Debt Recovery specialist, CCDR for a no obligation discussion about how we can help

This entry was posted in Blog, Industry News