Late or slow payment a threat to small business survival
- Food & Beverage & Retail sectors top the league table of worst performers.
- Late payment culture is rife across sectors that include Automotive, Technology, Media & Entertainment, Chemicals and Manufacturing
- Payment practices are improving in Construction sector.
Good Business Pays today published its analysis of more than 70 companies with the some of the worst payment performance.
Analysing data from over 5,000 companies, Good Business Pays identified::
- The Late Payers: Who report paying more than 50% of their invoices later than agreed terms.
- The Slow Payers: Who report an average time to pay of more than 80 days.
- The Late & Slow Payers: Who report taking more than 80 days to pay their invoices and pay more than 50% of invoices later than agreed terms.
Terry Corby, CEO of Good Business Pays said: “Supply, energy and now financial challenges have created a perfect storm for small businesses. While these pressures face all organisations they are felt most, and fastest, by small businesses. Our findings show some of the UK’s largest companies from a range of sectors taking more than three months to pay their suppliers and we think this is unacceptable. That’s why it is entirely appropriate that the government last month launched a consultation on payment practices, performance regulations and a statutory review of the role of the Small Business Commissioner.”
The list shows some of the UKs largest companies from the Food & Beverage sector, including AB InBev, Birds Eye, H J Heinz, Coca-Cola, United Biscuits, Walkers Snacks and Mondelez Confectionery. Examples from other sectors include NTT and Telefonica in the Technology sector, and Arriva Rail North in the Transport sector.
Responding to the report AB-InBev/Budweiser Brewing Group said: “We work with our suppliers on an individual basis, negotiating a number of terms, including payment terms, that suit both parties in the long-term. Our average time to pay an invoice is driven by large businesses making up 79% of invoices over the H2 2022 reporting period. Our average payment figure relates largely to these suppliers. We are especially focused on ensuring reasonable payment terms for the small businesses we work with, and 97% of our Small and Micro suppliers have payment terms below 60 days and were paid within those payment terms in 2022. We look forward to continuing to update on progress in this area.”
In 2022 the Federation of Small Businesses predicted that 400,000 would fail due to cashflow problems.
Tina McKenzie, Policy Chair at the Federation of Small Businesses, said: “We welcome Good Business Pays shining a light on boardroom practices. It’s clear that too many of the UK’s big businesses continue to fail to look after their suppliers. The Boards of companies with poor payment practices should take a long hard look at themselves and take the action needed to improve their performance, not only for the sake of their suppliers but also for their own brand reputation and corporate citizenship. Their Audit Committees should look into payment practices, using the quarterly prompt payment data to challenge management, and assure that progress is being made.”
As consumers face a once-in-a-lifetime cost of living crisis, small businesses are wrestling with a trilogy of challenges which Good Business Pays says in unsustainable. Large organisations in ‘cash conservation’ mode means many SMEs are living from hand to mouth and waiting too long to be paid for materials, transport, labour, and suppliers for work done months before. Coupled with rising food and energy costs, as well as consumer demand for ESG-compatible supply chains, and post-Brexit logistics and labour disruption, Good Business Pays says small entities face their most critical year.
Liz Barclay, the UK Small Business Commissioner said about the report: “I am hugely disappointed when presented with data that shows bigger customers aren’t doing the right thing by their smaller suppliers. It’s not difficult to understand their need to be paid quickly. The soaring cost of doing of doing business has left many smaller firms struggling to pay their bills. Having to wait inordinate lengths of time to be paid money that is rightfully theirs, leads to business failure, job losses, mental health problems and worse. Please, please will Boards of these firms scrutinise payment processes and, for the good of your own business, pay your suppliers quicker, on fair payment terms and by the agreed date if not sooner. “
Data used in Good Business Pays ‘Late & Slow Payers’ list is from information provided by companies under The Payment Practices and Performance Regulations (2017) which required large companies and Limited Liability Partnerships (LLP) to publish 6-monthly updates on their payment terms and conditions.
In compiling its report, Good Business Pays categorises companies into three categories:
- Late payers – those who report paying more than 50% of invoices later than agreed terms.
- Slow payers – which report an average time to pay of more than 80 days.
- Late and slow payers – those that report an average time to pay of more than 80 days and payment of more than 50% of their invoices later than agreed terms.
