Small firms lack confidence in late payment rules

Small businesses do not trust the Prompt Payment Code (PPC) to effectively tackle the UK’s poor payment culture, according to research by the Federation of Small Businesses (FSB).

The survey of FSB members finds that 79% of small firms don’t believe that the industry-led PPC can reduce late payment and unfair terms, suggesting a widespread lack of confidence in the system.

Many businesses continue to experience problems with late payment. 39% of firms reported they had been offered payment terms longer than 30 days, and 43% said customers had paid more than 90 days beyond the agreed payment date.

FSB members were asked for the reasons for late payment provided by customers:

  • 49% said that no reasons were given
  • 35% reported delays when processing the invoices
  • 34% said the customer had unilaterally extended the payment
  • 33% had been paid late because of lost invoices
  • 31% had never received an invoice.

The FSB is calling for a full independent inquiry into the UK’s payment culture, supported by 60% of surveyed member firms.

John Allan, national chairman of the FSB, said that poor payment practices are “holding back [the UK] economy”:

“If businesses do not get the money they are owed, they may not be able to pay their staff, invest in their business or pay their own suppliers. There is a knock-on effect right down the supply chain, which undermines the UK economy as a whole.”

In a previous survey the FSB revealed the extent of supply chain bullying faced by small businesses. Of the 2,500 surveyed firms, 17% said they had been the victims of unfair practices such as late payment, arbitrary discounts and supplier list fees.

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