Britain is experiencing a “late payment epidemic” according to The Times’* James Hurley, who says that Carillion’s collapse has exposed how very little the government and industry has done to tackle the problem.
Despite being a member of initiatives designed to tackle late payment, including the Prompt Payment Code (PPC) and a “supply chain finance” initiative, Carillion had doubled payment periods to 120 days and told suppliers they would have to pay banks providing the supply chain finance to access their cash.
Federation of Small Businesses (FSB) Chairman Mike Cherry says: “Sadly this sorry saga has laid bare the frailties of the Prompt Payment Code. While it is fundamentally a good idea, it does not work when it is most needed – as shown with Carillion’s behaviour since July 2017.
“Carillion were able to use their dominant position to squeeze smaller firms to mask their own financial failings. This irresponsible behaviour has put many small businesses in jeopardy, with countless people fearing for their jobs.”
However, Philip King, CEO of the CICM, which runs the PPC, says the code is not the problem: “We need businesses to be more willing to challenge the behaviour of buyers both directly and through the prompt payment code, so that the change in culture we all know is needed can be achieved.”
The UK’s late payment culture has left many small businesses suffering with severe cash flow problems. Overall, £26bn is owed to UK small businesses and 50,000 are forced out of business each year as a result.
“Small businesses have to run a tight ship with their cash flow, and as they struggle with increasing business costs on one hand and an uncertain domestic economy on the other,” says Mr Cherry. “They should not also have to struggle with the stress, time and money required to chase overdue payments from corporate giants.”
With this in mind, it is essential that SME business owners receive the specialist support and guidance they need to make effective decisions both now and for the future, as well as access to the right financial products suited to their specific business needs.
Our SME business experts at Beavis Morgan are available to structure your business with cashflow and profit forecasting to measure performance and maximise opportunities. We work to a pre-determined plan, to help you avoid any nasty surprises.
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* Reference: James Hurley, January 24 2018, 12:01am, The Times