Slow payments crushing SMEs

One of the problems facing small businesses in the U.K. is the failure of other, larger businesses that purchase products and services to pay their bills on time.  According to the Forum of Private Business’s CEO, Phil Orford, big companies that do work for the public sector are generally paid promptly, but they don’t pay their own bills from smaller suppliers for weeks or months.

The way it is supposed to work is that the government pays its suppliers of goods and services within five days of billing; those companies in turn are supposed to pay the bills from other companies in 30 days or less.  Mr. Orford said too often this is not the case, and the result is a cash-flow problem for the SME’s (small and medium enterprises.)

This week Cabinet Minister Frances Maude promised to take measures that will improve the situation.

He said he would “crackdown” on contractors who dragged their feet on paying invoices from suppliers even though the contractors themselves had been paid.  He also said he’s trying make it easier for SME’s to get more of the government’s procurement contracts, which amount to about £190bn annually.

However, Phillip King, CEO of the Institute of Credit Management, says the SME’s have to help themselves by taking advantage of the information supplied by credit reference agencies, and sharing that information with other small businesses so everyone knows if a particular company has a record of slow payments.