According to legislation imposed in November 2000, small companies could claim interest on late payment from large companies and the public sector. That right was extended at the beginning of this month to include claims against other businesses.
However the majority of large companies have not improved over the last six months and still take an average of 76 days to pay their suppliers, compared to an average across all industries of 60.25 days
Steve Kilmister, managing director of Experian’s Business Information division, blames this in part on companies unwillingness to exercise their rights against large customers because of the fear of losing future business.
He said: ‘There is an attitude, whereby some people believe it is acceptable to withhold payment of invoices until long after the agreed, contractual period.’
The ignorance displayed by large companies went against the trend recorded industry-wide where the average payment period fell by 1.25 days to 60.75.
The greatest improvements in payment times came from smaller companies, particularly in the oil sector (three days less) alcoholic beverages (four days less), transport, business services, textiles and property (two days less).
The oil sector was the best performing industry across all business sizes improving on average by 2.94 days.
The slowest of all companies were large vehicle and equipment rental companies at 85 days, while the sharpest increase over the last six months was among large property companies, which took 5 days longer.
Some of the blame for longer delays in payment in certain sectors was attributed to companies trying to improve their own cash flow in difficult times or because of a dispute with the supplier.
Regardless of the reason, the effect of late payment remained severe with cashflow, profits and growth all adversely affected and late payment frequently leading to businesses folding.
‘Small businesses should take steps to avoid late payment by finding out as much as they can about their customers before they supply any goods and services on credit. They can do this by checking their credit worthiness and payment record to find out how quickly they pay their bills,’ Kilmister said.
Click here to go to Experian’s average payment period chart.
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