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Just a day after the latest efforts were made in the House of Lords to tackle late payment problems the extent of the problem fac8ing IT firms was laid bare.
Research from MarketFinance revealed that IT firms were waiting an additional 23 days to be paid for completed work and the average amount of invoices being settled, after the deadlines set out in payment terms, amounted to £30,838 last year.
The fintech lender has also revealed that the issue is getting worse, with the amount of invoices being paid late climbing to 40% last year, compared to 36% in 2018.
This is happening despite the IT industry typically agreeing to 45 day payment terms, longer than the 30 most business lobby groups are demanding.
MarketFinance has looked back over the past seven years of figures and found that after some improvements 2019 came in as the worst year on record so far for the average number of days invoices were paid late with 23 well up on the 13 suffered in 2018.
“The IT sector plays a crucial role in our economy, employing over 1m people in the UK. These are businesses that build the infrastructure driving industry to outsourced tech and telecoms businsesses serving our SMEs. With payments going well beyond the already lengthy agreed terms, businesses effectively end up waiting up to 68 days, on average, to be paid. This will undoubtedly impact these growing sectors, affecting their payroll, supply chains and general financial wellbeing," said Bilal Mahmood, external relations director at MarketFinance.
“It’s unfair for businesses to have to wait to be paid beyond what is agreed. Late payment practices harm business cash flow, hamper investment and, in extreme cases, can risk business solvency," he added.
Labour Peer Lord Mendelsohn put forward a Private Member's Bill in the House of Lords yesterday to propose that there were tighter statutory limits for payment of invoices and there were penalties for persistent late payments and non-compliance.
Mahmood agreed that the government needed to do more to make sure the worsening trend did not continue into the current year.
"Government measures such as the Prompt Payment Code and Duty To Report have helped create awareness but need more bite. Until this happens, there are ways for SMEs to fight back against the negative impact of late payments, from having frank discussions with debtors that continuously fail to adhere to agreed payment terms, to imposing sanctions on those debtors, or seeking out invoice finance facilities to bridge the gap," he said.
“For every day an invoice is late, it’s more time spent chasing payment. This means less time for business owners to focus on growing their business, coming up with innovative ideas and hiring more people, or just paying their staff and bills. Things need to change quickly," he added.