Late payments still major issue for small businesses, says FSB

ALMOST two thirds (64.8 per cent) of Scottish businesses have been paid late in the last year with a similar proportion (67.2 per cent) reporting the phenomenon is on the increase, according to survey work by the Federation of Small Businesses (FSB) in Scotland.

The organisation is calling for big Scottish businesses to set an example, pay on time and publish their payment terms. It is also asking the public sector to ensure sub-contractors working on large procurement projects are paid on time.

Andy Willox OBE, the FSB’s Scottish policy convenor said: “Many small businesses don’t have the same cash reserves as their larger counterparts. So you can understand why FSB research shows that 44 per cent of members that are paid late are then forced to pay their own suppliers late. Further, fewer flexible credit facilities amplifies the impact down the supply chain.

“While there’s a lot individual businesses can do to give themselves the best chance of getting paid, there must be a way of using Scotland’s size to our advantage.

“Therefore, while there’s still work to be done to ensure that sub-contractors on public projects get paid on time, we’re asking big Scottish businesses to play their part in driving the recovery. We believe a break in practice at the top could drive virtuous practices to the bottom of the supply chain.”

The FSB’s survey work also shows that almost half (48 per cent) of Scottish members are currently waiting for more than £5,000 in late, invoiced work and one in five members (20.8 per cent) have charged interest or a levied fine for a late payment for supplied goods or services provided in the last year.

The FSB has long campaigned on mitigating the damage that late payment does to small and new-start businesses.

With 53 per cent of small business owners saying that they spend between one and six hours per week chasing late payments, the FSB says firms can take control by:

z Making sure there is a contract in place which confirms payment times and then penalties if payment is late – such as interest charges

z Offering a discount for prompt payment, dependent on the relationship with the purchaser

z Asking for payment up-front, or a deposit before work begins

z Talking to the purchaser before shipment to make sure that all sides know payment terms