Firms were asked to report the underlying factors behind late payment.

Amid the furore surrounding the LIBOR-fixing scandal, new Forum of Private Business research shows that many cash-starved small businesses are still looking to the banks to provide growth capital and restore confidence. A huge 94% of firms on the Forum’s cash flow and finance panel see improved access to finance as important to restoring business confidence.

 “While some firms are seeing improvements to cash flow, working capital and growth capital many more are seeing these deteriorate and are looking to the banks to provide the finance for growth in order to boost business confidence and drive economic recovery,” said the Forum’s Senior Policy Adviser Alex Jackman.  “Entrepreneurs believe banks can do a lot better and are calling for improved levels of service, including more branches, faster and more transparent decision making and greater choice.”

Mr Jackman continued to say that there is caution in some quarters over alternative forms of funding but the research suggests that, if these improvements are not delivered, many entrepreneurs alienated by mainstream lenders are more than willing to vote with their feet and explore newer, more innovative financial services less dependent on automated risk criteria. “There is an important role to be played by accountants and other financial advisers in guiding them in the direction of funding solutions that work for their businesses. Reducing business costs and tackling late payment would also improve the situation.”

Late payment

With approximately £35 billion owed to small firms in outstanding invoice payments firms were asked to report the underlying factors behind late payment.

In total, 42% reported behavioural late payment (where clients do not see prompt payment as important), 13% procedural late payment (where clients’ internal procedures slow down payments) – particularly in public sector supply chains – and just identifying 8% bad debt (where clients simply cannot pay). 

Some are concerned that their customers are deliberately holding on to payment. However, 38% of business owners surveyed said they have even seen an improvement in payment times over the past few months.

Generally, the government is believed to be doing a good job on tackling late payment. However, some business owners noted that payment disputes with local authorities and other public sector institutions have increased recently. Suggested solutions to late payment include the outlawing of contract payment terms over 45 days; the naming and shaming of late payers; highlighting examples of good practice; and random checks to make sure that timely payments are being made.