Late payment special part one: Covid-19 has made the situation worse with 62% of firms having payments frozen
When it comes to bad news for business Covid-19 just keeps giving with the damage bringing continued problems for firms trying to survive the effects of the shutdown and coming recession.
Late payment has always been an issue in many sectors but the business shut down has exacerbated an already problematic area. Daniel Bellis of the Federation of Small Businesses (FSB), said: “It is very easy to damage the supply chain, and during coronavirus it is harder than ever for small suppliers. If businesses aren’t careful there won’t be a supply chain to come back to in some cases.”
The FSB said 62% of small businesses have been subject to late or frozen payments during the coronavirus outbreak, according to their study of more than 4,000 firms across all sectors of UK industry.
In their report it was revealed that SME late payment had increased by 80% to £23.4bn, with businesses facing a total bill of £4.4bn a year just to collect the money owed. Ian Carrotte of ICSM Credit said the reason for the huge figure is that once an invoice goes unpaid there are a whole series of costs which add to the debt.
He said: “Late payment may well lead to overdraft charges or the need for a supplier to increase their borrowing, and if the debt requires legal action and a debt collector the costs with interest can spiral. ICSM Credit have a series of free legal letters which can be very effective in securing payment without added costs but for some of the huge plcs they see legal costs as part of their overheads and some firms even have an unwritten policy of delayed payments as they see it as free credit.”
Since 2008 there has been the voluntary Prompt Payment Code backed by the Government’s Small Business Commissioner which commits signatories to pay 95% of invoices within 60 days and work towards 30 days as normal practice. Sadly a number of some of the biggest names in industry have been removed from the code for failing to live up to their commitment.
The FSB reported that United Biscuits, Britvic, Kerry Foods, Hovis, Magners and Burton’s Biscuits were among the companies taking more than 60 days to pay suppliers and paying at least 15% of invoices outside agreed terms from their own research with Hovis, Burton’s, Magners and Britvic in the food and drink sector all paying late.
Following the collapse of Carillion MPs from all parties called for the Prompt Payment Code to become mandatory although it has so far not happened. In the European Parliament MEPs adopted The Late Payment Directive, which Member States had to implement into their own national laws by March 2013, but you not be surprised to hear that it has not been universally implemented in full.
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.
For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk