Larger business are responsible for the majority of late payments made to small and medium-sized enterprises (SMEs), a study has found, implying bigger firms are taking advantage of smaller peers' reliance on their custom. The report from insurance firm Zurich found that 53 per cent of late payments to small businesses were from firms larger than their own, and that SMEs were owed an average of £16,250.
Almost half (45 per cent) of the small businesses which were subject to late payments had to wait up to three months to get paid, while 14 per cent were typically forced to hang around for up to six months.
“For small companies, working with larger organisations and strong brands is an important part of building and running a successful business. But it is a two way street and large organisations are simply taking too long to pay small suppliers, which are dependent on reliable, regular invoicing to cover their own costs. It is not sustainable,” said Paul Tombs, head of SME proposition at Zurich.
The news comes ahead of the appointment of the first ever small business commissioner in autumn, a role created by the government to tackle late payment issues.
“The introduction of a champion for small businesses is a great initiative, but the new commissioner must be more than just a figurehead,” said Tombs. Zurich's report found 73 per cent of SME owners thought the appointment of a “national champion” for small businesses was a good initiative, but 78 per cent were not aware of the newly created commissioner role. Half thought the government should be doing more for firms like theirs. The government itself estimated in December that 50,000 business closures could be avoided each year if payments were made promptly.