Is this the end of late payment of SMEs?
Research from payments processor Bacs estimates that almost half of UK small businesses experience late payment, and that they’re owed a total of £26.3bn in unpaid fees. In a piece for The Guardian, shadow business and enterprise minister Bill Esterson provides further insight:
“Late payments cause 50,000 businesses to go bust every year, at an annual cost to the economy of roughly £2.5bn, according to the Federation of Small Businesses. Of the 47% of small firms hit by late payment, the average wait is 72 days for their larger clients to settle invoices.”
“Large clients avoid paying SMEs because they can”
The dispiriting conclusion is that large clients will avoid paying SMEs because they can; there is insufficient regulation in place to stop them, and they know their business is too valuable for SMEs to risk rocking the boat by pushing for timely payment.
Concerns about cash flow and accessing finance feature prominently in surveys establishing the most stressful aspects of SME ownership, and late payments are a major factor in exacerbating these issues. When every penny matters for small businesses and startups, anything that squeezes their margins greatly jeopardises the likelihood of staying in business.
The government’s previous announcement of measures – taking effect in April – that will force large firms to publish details of their payments practices and performance on a website set up by the Department for Business, Energy and Industrial Strategy is a welcome one. But the fact that details need only be published twice a year suggests that the threat of criminal legal action against those who fail to comply may be too slow to make a difference for SMEs already on the brink of closure.
“Mistreatment of SMEs is a dynamic we see too often in the FX industry”
The opportunistic mistreatment of SMEs by larger firms is a dynamic we see all too often in the FX industry. Time and again, major FX providers will levy disproportionate charges on SMEs, knowing full well that small businesses lack the influence to question the terms of their transactions. And with no universal code of practice for FX providers, we are well aware of some of the questionable practices undertaken by those willing to take advantage of insufficient regulation.
As a peer-to-peer FX provider that has tailored its services to the needs of small and medium-sized businesses (and is dedicated to making our clients’ payment of cross-border invoices as a quick, cheap and painless as possible), we are hopeful that the incoming measures and commissioner will have sufficient power to protect SMEs’ from businesses seeking to exploit their innate vulnerability.