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The Federation of Small Businesses (FSB) has taken steps to try and reduce the late payment issues that some suppliers in the channel have to wrestle with.
SMEs that operate on fairly tight margins can be hit hard by customers and suppliers that fail to pay on time and in some extreme cases can be pushed to the edge.
The FSB has found that 50,000 SMEs a year fold because of late payments with the average late payment coming in at £6,142. Research from the business group found that 37% of smaller firms have run into cash flow difficulties because of late payments, 30% have been forced to use an overdraft and 20% say late payment has hit profits. In the worst cases cash flow difficulties have caused businesses to fail.
The government has been called on to do more to protect firms and there have been lists of the worst large suppliers printed to name and shame those that fail to settle up in a timely manner.
While the FSB waits for more to be done by government it has launched its own service that allows an SME to generate a solicitors letter that can be sent to the debtor with a demand for payment in seven days.
The FSB has found that in the vast majority of cases a solicitor’s letter is all it takes to receive payment. If that fails then the lobby group can take further action.
“Late payment has been a huge and debilitating problem for smaller businesses for too long. Whilst we persist in asking the Government to tackle the worst payment practices, we’ve now introduced this new product to empower small businesses to recover their debts in the most simple and effective way possible so they can focus on running their businesses," said Dave Stallon, commercial director at FSB.