Large companies are settling their bills up to four weeks late as a short-term funding solution, according to a new report - endangering smaller businesses which cannot afford to wait.
In fact, smaller businesses could be waiting as long as five months for payment from point of invoice for goods and services supplied months earlier, the poll, conducted by Experian revealed.
The report supports findings made by direct debit company Bacs earlier this year, which revealed almost a third of small businesses could go bust if they are left £20,000 out of pocket - worryingly, the average amount owed at any given time was £30,000.
“The problem for smaller suppliers is exacerbated because they are often under pressure to settle their own bills quickly to secure goods and supplies essential to their business,” said Tony Pullen, managing director of Experian’s business information division.
Michael Chambers, managing director of Bacs, added: “The scale of late payments has grown in value yet again, despite companies investing a significant amount of time and money to secure the demise of the problem.”
Despite the problems for their businesses and legislation to protect them, entrepreneurs are still reluctant to challenge large companies over payment terms, as they fear it may affect existing and future contracts.
John Wright, chairman of the Federation of Small Businesses (FSB), said: “Big companies appear to be aware that small businesses are afraid of taking them on and are abusing their power as a result.
“At a time when small businesses are finding it difficult to deal with a slowing economy and rising costs, it is shocking that large companies think it is acceptable to use them as an unofficial source of credit.”
© Crimson Business Ltd. 2008
