Small Businesses in the UK Suffer Consequences of Late Payments
Over recent years, many people across the UK have decided to start their own businesses.
This has resulted in a new wave of small businesses that could potentially have a huge positive impact on the country’s economy.
However, for any small business that is still in the throes of growth cash flow can be a big problem and this is an issue that is being made worse by late payments.
According to a recent report, many small businesses are suffering as the result of other businesses failing to pay their suppliers and service providers in a timely manner. For smaller businesses with little to no financial backup, these late payments can make a huge difference in terms of cash flow and in some cases can bring operations grinding to a halt.
Recent reports have highlighted how the government is keen to tackle this problem through legislation designed to put an end to the late payment culture because of the damaging effect it can have on smaller businesses. However, one report claims that the government is actually one of the offenders and is the least likely amongst businesses to get payments to service providers and clients on time.
Late payments are on the rise
Data from Dun & Bradstreet showed that over the past year there has been a drop of 3.5 percent in the rate at which the government pays its suppliers on time.
Some believe that this drop is due to funding cuts resulting in government agencies and department hanging on to cash for as long as possible to improve their own cash flow while the smaller suppliers and service providers are left to suffer the consequences.
The figures also showed that there had actually been improvement in payment times over the past year amongst all other business sectors, so while the government may be trying to tackle the problem of late payments to small businesses it is actually now one of the key offenders.
The D&B report showed that statistically, larger businesses were over two times as likely to make late payments to suppliers and providers compared to medium and small businesses. The percentage when it came to small and medium sized businesses was 15.1 percent whereas for larger companies it stood at 30.9 percent.
Many smaller and start up companies do not have any lines of credit to turn to when cash flow becomes a problem and they therefore rely on timely payments in order to continue operating as normal.