This and other findings were revealed by the Association this week when they launched their Credit Watch Survey for autumn 2011.
According to a statement from the ISME, the main culprits for late payments are “accountancy led big business and the state sector who are delaying payments to their smaller suppliers. This situation has occurred, despite legislation being in place for almost ten years, supposedly to alleviate the situation.”
The ISME recommend that the government champion a ‘Fair Payment Charter’ in a bid to ensure that market dominant positions are not used to delay payments to small and medium businesses.
Commenting on the situation, ISME Chief Executive, Mark Fielding stated, “Small companies are still being forced by accountancy-led big businesses and state agencies to accept credit terms longer than those outlined in the legislation. State bodies are blatantly abusing their position by simply ignoring the Minister’s instructions.
“These same large companies insist on adhering to the 30 day rule, or less, for payment for their own sales and services, creating a double bind for small companies who are only in a position to make payment once they themselves have been paid. This amounts to an ‘interest free loan’, which SMEs are obliged to give to their much larger and economically stronger customers. The result of this is that the smaller businesses are closing down, not due to lack of profits, but lack of cash, as the state-rescued banks are not lending to cover the shortfall in cash flow.”
Mr Ian Martin, Small Firms Association (SFA) Chairman, concurred that late payments are affecting all businesses and his association has witnessed it recently. “The SME market place is finding it extremely hard to get cash in from customers,” said Mr Martin who added that he could not say for sure and agreed with the ISME that this was a reason for companies failing.
According to Mr Martin, the main concern of his members relates to credit, which he believes the lack of leads to late payments. “The bank won’t give you the money to pay your bills, therefore you are late paying your supplier.”
Mr Martin added that the banks are very inflexible when it comes to credit extensions to see firms through short-term periods.
