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New research from Graydon UK shows that the amount of overdue money owed by UK companies to their
suppliers could be as much as £ 18 billion at any one time.
Graydon has analysed 1.3 million individual invoices collected over the last
year from UK supplier sales ledgers to reveal that around 30% of bills are paid
beyond terms.
The sample represents suppliers with an annual turnover of £50m or more.
Martin Williams, Managing Director of Graydon UK, commented: “The sales ledgers
we examined were owned by larger suppliers with sophisticated credit management
set ups and more muscle to chase payments from their customers.
"SMEs lack both of these weapons and therefore I would expect their experience
of late payment to be worse than our sample.
"I would not be surprised at all if the percentage of overdue invoices is closer
to 50% than 30%.
"This would mean something like £30 billion is sitting in company bank accounts
when it should be residing in suppliers’ bank accounts.”
“This problem – seemingly endemic to UK business culture – is having a
devastating effect on many companies’ cash flow.
"With 30% of payments outstanding, if only these suppliers took advantage of
late payment legislation and asked for interest, by rights at 2% above base rate
on that overdue money, it would earn them the not insignificant total of
£3,205,000 every single day”.
August saw the fourth anniversary of the government’s last late payment
legislation, which, among other things, gave companies the right to charge
interest on overdue trade payments. However, celebrations were rather muted, and
for good reason.
All the evidence points to the fact that this piece of law has done very little
to change the way British businesses pay their suppliers.
For a multitude of reasons suppliers are not charging interest on overdue money,
nor are they having great success using other tactics to change the payment
habits of trade debtors.
The perennial problem in Britain of late payment is a problem that just won’t go
away.
Martin Williams says the government should take additional steps to strengthen
legislation that would protect businesses from late payment.
He added: “Firstly, they should look at outlawing company incentive schemes and
bonus arrangements that encourage employees to delay payments to suppliers
beyond terms.
“In effect, these schemes are designed to invite individuals to put their own
companies in breach of contract with suppliers.
"This is unethical behaviour and should be stopped. Of course, many of these
schemes are not committed to paper for obvious reasons.
"Take, for example, a verbal instruction to accounts staff stating that no
supplier should be paid unless they chase their debt. It is this type of
thinking within UK organisations that creates our late payment culture.”
Source:
Credit
Control Journal
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