Government under further pressure to tackle 'late payments culture'

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Ministers have been urged to deal with the "late payments culture" that is widespread in Britain.

According to Close Brothers Invoice Finance, more than one in three small and medium-sized enterprises (SMEs) are suffering with a major payment delay problem.

The organisation acknowledged that successive governments have taken steps to try to address this issue, such as creating the Prompt Payment Code.

However, Close Brothers believes the efforts of policymakers to clamp down on the culture of late payments have failed to protect hundreds of thousands of SMEs from "exploitative customers who fail to pay their bills on time".

Figures showed that nearly a fifth of those who consider overdue invoices a problem are finding it is seriously affecting their ability to trade.

Research also indicated that almost two-thirds of SMEs spend at least one day a month chasing payments that should have been made already.

Close Brothers said this is causing major cash flow problems for SMEs, as well as adding costs to their business because they are devoting time and resources to chasing overdue payments.

David Thomson, spokesman for Close Brothers, has therefore urged the government and regulators to do more to protect these businesses.

"The UK’s record on late payments is very poor," he said.

"While other countries have seen late payment rates come down as their economic fortunes have improved, the UK’s business culture seems to be one in which it is acceptable not to pay SMEs on time.

"SMEs often lack the power to hold large organisations to account and need greater support from government to help them do so.”

Mr Thomson went on to state that SMEs need better statutory protection, as well as an independent champion that is prepared to take action on their behalf.

He argued this is necessary because SMEs often feel uncomfortable challenging larger businesses over late payments, particularly if they rely on these firms for "substantial amounts of business".

"This is where regulatory action is essential," he commented.

However, Mr Thomson insisted there are several steps SMEs can take to try to take charge of the issue.

For instance, he said smaller businesses should be "crystal clear" about their payment terms at every stage of their dealings with customers.

In addition, Mr Thomson advised them to chase invoices the moment they become due, as well as to consider credit checks on new customers and not accepting poor practices from existing customers.

The issue of late payments has already been flagged up this week by the Federation of Small Businesses, which warned that 37 per cent of smaller firms have run into cash flow difficulties because of payments not arriving on time.

Estimates from the organisation suggest that 50,000 business closures could have been avoided in 2014 had payments been made on time and as promised.