Big firms' late payment behaviour "nothing short of outrageous"

Worrying new evidence shows that large companies are exploiting smaller businesses by delaying invoice settlement and imposing draconian new payment terms with little notice.

As the credit crunch continues to bite, the Federation of Small Businesses (FSB) says that big organisations are unashamedly making small firms wait over 100 days before getting paid, often changing payment terms with little notice.

This worrying statistic comes barely after we reported that a survey of FPB members has found that 82% of businesses are seeing an increase in the number of customers that are paying late. And with 83% of businesses stating that late payment will have either ‘serious' or ‘very serious' consequences for their businesses, the problem could be severe.

In one example, the high street chain Alliance Boots wrote to its suppliers in June to inform them that, as of April 2008, bills would be paid up to 75 days from the end of the month of invoice with a 2.5% settlement fee.

There is existing legislation (The Late Payment of Commercial Debts (Interest) Act 1998) which allows small business owners to charge interest on late payments, but many are reluctant to use this for fear of losing contracts with big businesses on which they are often reliant.

FSB National Chairman, John Right, commented:

“Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous.

“At a time when small businesses are finding it difficult to deal with a slowing economy and rising costs, it is shocking that large companies think it is acceptable to use them as an unofficial source of credit.”

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