SME suppliers to public sector hit by ongoing late payments

The ongoing problem of late payments is severely hampering small and medium sized businesses (SMEs), new findings show.

The Federation of Small Businesses (FSB) research has found that the shocking poor payment practices epidemic running through public sector supply chains is putting many SMEs at risk.

The data, part of a wider study looking into how supply chains in the UK can be improved, shows that 89 per cent of public sector suppliers have been paid late. This is true both for suppliers to central government (88 per cent), local government (91 per cent) and those supplying to public infrastructure projects (91 per cent).

There are calls for the Government to introduce penalties for departments, agencies and public bodies who fail to pay invoices on time, with further appeals for departments, agencies and public bodies to be forced to automatically pay interest on any payments made later than contract terms.

Responding to the findings, FSB National Chairman Mike Cherry, says: “Our research highlights a shocking failure in the public sector – the government needs to get a grip if we are to have a chance of stamping out the poor payments culture running rampant in the UK economy.

“It is unfair and unacceptable that so many small firms, many of which are already struggling with the high cost of doing business, are also being forced to wait for money they are owed for work completed for the public sector. The Government needs to lead by example and ensure that small public sector suppliers are paid promptly on completion of their work. This starts with the Government and its strategic commercial suppliers, making sure that prompt payment is embedded throughout their supply chains

“By improving public sector payment practices, the Government can bring some fairness to the public procurement process and help reduce the risk of public sector contracts for small businesses. Crucially, this would also prevent Carillon-type practices happening again. This is a win-win for everyone involved in the supply chain because when small businesses are used effectively, they are able to create jobs and growth.”

When it comes to cashflow, SMEs have a tight ship to run. 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.

Through our partner businesses, BM Structured Finance and BM Advisory, we are also able to help with sourcing and restructuring debt finance for SME businesses, as well as assisting with resolving issues which can impact on business performance and success, and finding innovative solutions for businesses and individuals in distress.

If you would like to discuss ways of improving the free cashflow in your business, please contact Steve Govey or your usual Beavis Morgan Partner.