The money owed to small and medium-sized enterprises has risen 10% in the last 12 months.

A group of leading organisations have joined together to urge the government to tackle the growing problem of late payment in order to help small firms survive, grow and drive economic recovery. 

The industry bodies, including those representing UK-based suppliers, have written to the Business Minister, Mark Prisk, to call for a plan of action to address late payment, which decimates small firms’ cash flow.

New data from Graydon UK, a credit reference agency, shows that 76% of respondents believe the government is not doing enough to protect UK businesses from late payment.  This is despite 51% reporting that the problem has become worse during the past year, 45% that it could threaten their ability to invest in their businesses and 20% that it could prevent them from continuing trading.

In addition, recent research from the payment body BACS shows that late payment to small businesses, mainly originating from large companies at the head of supply chains across a broad range of sectors, has hit an all-time high.  The company’s figures show small and medium-sized enterprises (SMEs) are now owed a total of £33.6 billion in outstanding invoice payments – a rise of 10% in the last 12 months and the highest figure since records began in September 2007.

This is backed by recent research from the information company Experian, which found that late payment among UK firms of all sizes increased by almost a day on average during July, August and September 2011, compared to the April to June period.  Yet the same figures show the UK’s smallest businesses – those with one or two employees – managed to limit their late payment of bills to just half a day, representing the lowest rise during the period.

Further, with the use of credit checks more than doubling since last year in response to increasing late payment, a survey from Experian and the Institute of Credit Management (ICM) has found that small firms are more than twice as likely to suffer as a result of significant variations in credit scores.

“There is mounting pressure on the Government to crack down on the growing corporate late payment culture, which is already a huge problem for small businesses and is in danger of becoming endemic,” said Phil Orford, Chief Executive of the Forum of Private Business.

“Late payment and enforced retrospective changes to payment terms and conditions force firms out of business, plain and simple. It is time to tackle the problem once and for all so that prompt payment becomes the norm, unless there are good, justifiable reasons otherwise.  In addition to the actions we want ministers to take, we recognise there are proactive steps available to business owners, including implementing proper credit management and credit checking procedures, but there is clearly a culture of fear when it comes to naming and shaming large late payers.”

He concluded: “We are also urging anyone subjected to this kind of treatment to tell us about it – we’re not afraid to take these companies on.”

The organisations backing the late payment campaign are: Graydon UK Ltd; Lloyds TSB Bank Plc; the Asian Business Federation, the Brewing, Food and Beverage Industry Suppliers Association; the British Home Enhancement Trade Association; the British Printing Industries Federation; the Business Woman’s Network; the Federation of Master Builders; the Federation of Petroleum Suppliers; the Forum of Private Business; the Institute of Chartered Accountants in England and Wales; the Institute of Credit Management; PCG – the Voice of Freelancing; the National Association of Commercial Finance Brokers; the National Farmers’ Union; the National Pig Association and the Tenant Farmers Association.