Three quarters of SMEs fear chasing late payments
MOST small- and medium-sized enterprises (SMEs) are afraid to take action against a late payment, despite unpaid invoices posing a “significant” issue for their business.
According to a new white paper from the Small Business Commissioner, Paul Uppal, and business lender Growth Street, 75 per cent of SMEs would rather not chase late payments for fear of damaging their client relationships. A further 76 per cent said that they were more worried that their invoices would not be paid at all, if they took action against late payments.
Read more: SMEs finding it harder to access finance
“The key findings in this survey highlight that small businesses tolerate late and non-payment due to a fear of reprisal,” said Paul Uppal, small business commissioner.
“The government is building an environment in which small and medium-sized businesses can continue to prosper. Through my role, I am committed to keep the spotlight on this issue and instill confidence in the minds of small businesses. I will continue to tackle late payment and address the imbalance in market power between parties, promote transparency and encourage better payment practices through culture change.”
The white paper, titled ‘Taking Notice of UK Business’ surveyed 500 UK SME decision makers in an effort to find out how they feel about payment terms and late payments. More than a third of SMEs said that they had been subject to unfair payment practices, while almost half (47 per cent) said that they had been subject to late or otherwise unfair payment practices from large businesses.
Most of the businesses surveyed had payment terms of up to 30 days, while only 14 per cent said that they had agreed payment terms of more than 61 days with their suppliers.
“Every business should have the right to know when and if they will be paid,” said Greg Carter, chief executive of Growth Street.
“The fact that a third of all businesses have been subject to unfair payment practices is a shocking statistic – more needs to be done to educate SMEs about the options available and empower them to act against poor payment practices.
“This survey with Paul Uppal is part of Growth Street’s broader commitment to helping UK SMEs grow: one of the reasons we are transforming the overdraft for SMEs is to provide an alternative to invoice finance. However, people shouldn’t need to seek loans to cover unpaid invoices – they should have the support and knowledge that they will be paid on time, every time.”