SMALL FIRMS HAVE LITTLE CONFIDENCE IN PROMPT PAYMENT CODE
March 20 2015.


New research published from the Federation of Small Businesses (FSB) makes clear the scale of the UK's payment problem and the need for an independent inquiry in the UK's poor payment culture.


The government's foremost tool for addressing the UK's deteriorating payment culture does not have the confidence of much of the small business community. The FSB's latest research found that only one in five (21%) FSB members are confident the Prompt Payment code will be enough to address the UK's poor payment culture.

When asked if they would support a full and independent inquiry into poor payment practices, more than half (60%) of businesses supported the proposal. This new FSB data helps to illustrate the problem; two fifths (39%) of businesses questioned were on average offered terms longer than 30 days for payment. On top of excessively long payment terms, 43 per cent of firms said they have waited over 90 days beyond the agreed payment date before they got the money they are owed.

As part of the survey, FSB members were also asked to give reasons why their customers paid late. The top five reported reasons were: no excuse or justification was given (49%); internal invoice processing issues caused a delay (35%); the customer extended the payment terms without your consent (34%); invoice was lost or misplaced (33%); invoice was never received (31%).

John Allan, National Chairman, Federation of Small Businesses, said: "If businesses do not get the money they are owed, they may not be able to pay their staff, invest in their business or pay their own suppliers. There is a knock-on effect right down the supply chain, which undermines the UK economy as a whole. Late and poor payment practices are holding back our economy and pushing potentially successful firms out of business."

In December 2014, the FSB revealed that almost one in five small businesses had been subject to some form of supply chain bulling. Five per cent had experienced the so called ‘pay to stay' practice used by Premier Foods, who asked suppliers to pay a flat fee in order to be considered for future contracts.

John Allan, continued: "Despite increasing public outrage at the mistreatment of smaller suppliers by their larger customers, the UK's payment culture continues to get worse. In addition, to strengthen the Prompt Payment Code there needs to be a cultural shift to improve payment practices. To tackle poor payment culture it has become clear that we need an independent inquiry which should report before the end of the year."