When you next do your weekly shop in a supermarket, imagine a scenario of walking towards the checkout with a full trolley. You approach the cashier with a smile and a wink before announcing that you’ll pay for the shopping in 60 days from now. You push your trolley through the checkout and head out to the car park.
It may sound far-fetched but that’s exactly how one local business has described the frustration of coping with late payments. The company sent an engineer to repair an item of equipment in March but didn’t receive payment for the work until early May, by which time the company had to make payments to meet two staff payroll runs and two lots of monthly rent and utilities.
Late payments are more than just an inconvenience. They are a systemic issue that threatens the very survival of thousands of businesses across the UK. According to the UK government, late payments cost the economy nearly £11 billion every year and leads to the collapse of 38 businesses every single day.
Late payments can damage every aspect of a business. When cash flow is disrupted, companies may struggle to pay their own suppliers, invest in new opportunities, or even meet staff payroll costs. This creates a domino effect throughout the supply chain and weakens the wider economy. For some businesses, late payments can mean the end of the road, with livelihoods lost, jobs cut, and communities affected.
There are a number of reasons why late payments continues to be an issue. Larger companies may impose extended payment terms on smaller suppliers, knowing they lack the influence to push back. Some businesses may lack efficient invoicing or payment systems. In times of financial strain, some firms delay payments to preserve their own cash flow, which has a knock-on effect, down the chain.
One of our Chamber members has developed a pragmatic solution to address the issue of late payments, with companies adding their payment track record to accounting software packages. With director awareness of total contingent late interest liability in the public domain, it may prompt businesses to take account of potential reputational damage by taking voluntary action to avoid late payment.
We’re keen to get more information about the impact of late payments on local businesses here in Staffordshire, as part of our response to the DBT consultation. If your business has been affected by the issue of late payments, please send me the details, as this will help to build anecdotal evidence for our response:
declan.riddell@staffordshirechambers.co.uk
I would also encourage you to share your feedback with the consultation, which can be opened here:
…but don’t delay, as the consultation closes on Thursday 23rd October!!
