Half of businesses have faced issues with late payments in the last year, a new survey of 787 company directors reveals. The poll by the Institute of Directors shows that 3 in 10 business leaders see ‘excessively bureaucratic payments system’ as the main reason for late payment and just over a fifth said it was a result of ‘grossly unfair’ terms or practices used by larger firms.
The recent collapse of Carillion has shone a light on the issue, but the business group’s figures show the problem is more widespread than just the construction sector. 1 in 5 IoD members, who predominately run small- and medium-sized firms, support the reporting requirements for large companies introduced last year, but this measure is yet to bed in. Meanwhile, a mere 1% of IoD members believe that using the Small Business Commissioner was the best way to address this issue.
Edwin Morgan, Director of Policy at the Institute of Directors, said:
“It is deeply disturbing that so many businesses have to struggle to claim the money they are owed. Chasing late payments can have a particularly damaging effect on small companies, sapping resources and hurting their productivity.
“Our members will try only to work with businesses that pay on time, but it’s not always possible. At the heart of the issue is a power imbalance. Smaller companies are often made to jump through unnecessary hoops by larger customers, but don’t want to risk souring the relationship by taking any formal action. Governments have tried to tackle the issue through the Prompt Payment Code, but it is clearly still a problem, and an area where many businesses would like to see action.
“Victims of late payment now have access to the newly-created Small Business Commissioner, but the role is not yet well-known. The Government has a job to do to publicise the options that are out there, and we would also urge them to consider stronger measures to clamp down on the menace of late payment.”