Small business tsar urges Lancashire firms to walk away from late payers
Walk away from late payers - that is the advice from the country’s small business tsar as many Lancashire firms struggle with delayed payments.
Small Business Commissioner, Liz Barclay was speaking amid calls for the Government to act to reverse the late payment culture in the UK which the Federation of Small Businesses warned earlier this year threatens the future of 400,000 small firms.
A study of more than 1,200 business owners found one in three (30 per cent) saw late payment of invoices from customers increase amid the cost of living crisis and it appealed to the Government to change the law so that company’s audit committees were made directly responsible for supply chain practice.
The office of the Small Business Commissioner provides support for small businesses experiencing poor payment practices and so far, has clawed back £8m in unpaid invoices.
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But Liz Barclay said not all big firms were taking advantage of suppliers and that during the pandemic many realised that smaller suppliers were vital and paid them quicker.
The Xero Small Business Insights showed average payment days for small firms at 35 days before the pandemic, 37 days in May 2020 and then dropping drastically to 28 days in July 21.
She said: “Firms cut payment terms to 14 days and even 7 days. It could be done.
“In April 22 average payment days had bounced back by 1.7 days. But averages hide some appalling payment practices. There are cash-strapped small suppliers being asked to wait 60, 90, 120 and even 150 days before their invoices are paid.
“Some of this is down to bigger businesses holding cash owed to their suppliers to grow their own businesses, but it’s often down to the payments person having no idea how important quick payments are to small firms trying to manage their cashflow.
“A small supplier has few options for managing cashflow if invoices aren’t paid fast. It’s hard to borrow at a price you can afford if you have to fill a cashflow gap.
“Don’t accept longer payment terms. You can’t afford to wait three to five months after you’ve delivered the work. The longer you have to wait the more chance you’ll go bust, run out of cash, find it impossible to pay wages and bills, including those from your own suppliers, or won’t have enough income to run your household.
“You need to walk away and find customers that will respect you as part of their team and pay you quickly and fairly. That takes courage. The message to big customers is: #PayDontDelay.”