Small firms face increasing payment delays

Small businesses are waiting longer than ever to receive payment from customers, according to the Asset Based Finance Association (ABFA).

The research, based on analysis of Companies House data on 130,000 businesses, finds that businesses with less than £1 million turnover are facing average payment delays of 72 days – 1 day more than last year.

In contrast, large businesses with more than £500 million turnover are waiting for an average 47 days to receive payment, which is 1 day less than a year ago.
Small firms are experiencing payment delays 11 days longer than during the peak of the downturn in 2009 when they average payment term was 61 days.

The government recently announced plans to launch a Small Business Conciliation Service that will help solve late payment disputes between small and large businesses.

Jeff Longhurst, chief executive of the ABFA, said:

"It's very worrying to see that the trend is going in the wrong direction for smaller businesses, in spite of what is a more benign business climate than we have seen for several years. The benefits of the recovery are not being felt equally.

"Delays to payments put enormous pressure on small businesses' [sic] cash flow – they have to meet overheads, tax bills and their own supplier invoices whether they've been paid or not. Smaller businesses are particularly vulnerable. No matter how successful they are, if just a few invoices aren't paid on time, they could end up in serious financial trouble."