Two-thirds (66%) of small businesses are feeling the effects of clients who fail to pay their bills on time, according to a study.
Banking group Close Brothers surveyed 900 small business owners and found the problem was a real issue for 87% of SMEs in Northern Ireland, 73% in London and 72% in the South West.
SMEs have felt multiple effects from late payments, ranging from damaged supply chain and business reputation to impacting credit ratings and further access to funding.
74% of small businesses polled don’t feel suitable legislation exists to counteract slow payments from debtors, with 1 in 4 firms forced to seek legal advice.
The study found enterprises in transport (78%), manufacturing (74%) and printing (73%) were the worst affected by late payments from clients.
The findings come despite the government’s Prompt Payment Code (PPC), which intends to support under pressure businesses dealing with overdue payments.
The PPC sets the standards for best practice for both businesses and suppliers dealing with late payments and invoices, ensuring everyone is paid on time and offered clear guidance on procedures.
Neil Davies, chief executive at Close Brothers, said:
“Late payments are a very real issue for SME business owners and in some cases directors are having to defer their own salaries, increase their overdraft or pay their own suppliers late to ensure they remain liquid, causing the vicious circle to continue.”
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