Late payments are a serious threat to small business livelihood, and the Carillion fallout proves that all too well.
Reports suggest that up to 30,000 subcontractors may not get paid after the construction giant folded earlier this week.
The firm’s payment policy was typical of one standing in such a powerful position. According to trade body the Federation of Small Businesses (FSB), small suppliers were made to wait around 120 days to be paid, with some invoices in the hundreds of thousands of pounds.
Suzannah Nichol, chief executive of trade body Build UK, added that she expects around 17 or 18 per cent of businesses who are creditors of the company to not make it through the next five years.
But it’s not just large corporations small businesses need to be worried about. New research suggests that our overseas friends in the EU can take just as long to balance the books.
MarketInvoice, which published the report, claims that EU-based firms took “30 times longer” to settle invoices from UK companies in 2017 compared to 2016.
Its research suggests that invoices are paid, on average, 9.1 days late, while the proportion of EU firms making late payments rose from 40.4 to 73 per cent.
And even the US can be poor at times, according to MarketInvoice. It shows that US-based firms pay, on average, 19.5 days later than contractually obliged.
Author Bilal Mahmood, said: “UK exporters are being squeezed globally as more of their invoices are being paid late and taking longer to be settled. Businesses respect long payment terms, but late payments are unacceptable.
“The new trading environment in 2017, with Brexit negotiations ongoing against the backdrop of global economic uncertainty, could have caused some consternation amongst late-paying firms around the world. This is not an excuse to not honour their payment terms.”
Both reports come weeks after the launch of the Small Business Commissioner’s website.
Margot James, Small Business Minister, said the platform will “empower” small business to take action if they are paid late.
The FSB said it encourages all small businesses affected to use the service. Separately, small businesses affected by the Carillion fallout have been advised to continue to work and provide goods and services as normal.
The Commercial Litigation team at Palmers Solicitors are able to advise on all kinds of business disputes, including contractual implications of insolvency events, breach of contract, late payments and debt recovery. For more information about any of our services, including our Commercial Debt Recovery Scheme, please contact us.