As many as nine-in-ten (88 per cent) of UK small businesses were affected by late payments in 2013, according to new research from Hilton-Baird Collection services.
However, the majority of disgruntled SMEs damaged by late payments did not support the idea from the Department for Business that the Government could introduce fines for those paying late.
The survey found that just 35 per cent of SMEs supported the idea of fining late payers, with 55 per cent rejecting the concept altogether.
The report suggests that late payments are causing a domino effect along the supply chain, with almost half of those affected neglecting to pay their own suppliers as a result, and fines would therefore drip down the supply chain too.
Alex Hilton-Baird, managing director of Hilton-Bair Collection Services, said: “The extent to which a single late payment can impact upon the supply chain is a major concern.
“While it’s obviously going to damage the supplier’s cash flow, it’s clear that many are being left with little option but to fight fire with fire.”
The report found that a third of SME respondents were forced to take on more debt as a result of late payers, with one-in-ten having to turn away new custom.
“With no credible sanctions in place – statutory interest is still vastly underused and the less said about the Prompt Payment Code, the better – businesses are commonly treating invoices as interest-free loans. It’s a deeply troubling situation,” added Hilton-Baird.
Another issue with additional fines for late payments is that businesses will find it equally difficult to obtain a fine as they do for the initial invoice.
“Even as a deterrent, fining late payers simply won’t work as, realistically, it will be left to the businesses themselves to enforce it,” said Hilton-Baird.
“If they can’t collect an invoice, how much success will they have trying to impose an additional fine? In reality, it’s down to businesses’ credit control departments to ensure they’re doing all they can to protect themselves.”
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