News

January 08, 2010

Big businesses paying suppliers more promptly, says Experian

Big businesses paid their invoices an average of 14 days faster in November 2009 than the same period in 2008, according to credit rating firm Experian.

Experian's Late Payment Index found that UK businesses paid their invoices an average of 12.5 per cent faster than in November 2008. It also highlighted that late-paying big businesses (with more than 501 employees) reduced the length of time their payments were overdue from an average of 32 days in November 2008 to 18 days in November 2009.

The reported improvement in payment times comes after criticism from small business groups that big businesses were using small firms as an unofficial source of credit.

According to Experian, the improvements in payments may be partly due to the introduction of the Government's Prompt Payment Code, which encourages businesses to pay their small suppliers on time.

"Businesses are finally realising the detrimental impact that their own late payment has on the cashflow of their business partners," said Experian's head of commercial credit, Joe Myers.

However, the Federation of Small Businesses (FSB) disagreed with the Experian figures and said that late payments continue to be a problem for small firms.

"It's still a big issue in the private and public sector – some firms can wait for up to three months for payment," said an FSB spokeswoman. "Small firms need to make sure they have a good contract in place and an agreed payment time before engaging in any work."

An Experian spokesman agreed that small firms need to take steps to ensure that they are paid promptly by customers. "Firms should ensure that statements and invoices are sent out on time, that they are accurate and contain all the pertinent information such as purchase order numbers," said the spokesman.

"Do not be afraid to contact the customer to ask for payment as soon as it is due, as has been agreed in the terms and conditions of the sale," he added. "In addition, if charging interest on late payments is a factor that has been clearly agreed within their terms and conditions of payment, then firms are within their rights to charge it.

"However, the key tactic is to keep communication with the customer going, so that any potential issues are identified before they become a payment problem," said the spokesman.