400,000 small businesses threatened by late bill payments, new study finds
Late payment of bills threatens the survival of small businesses, a group of companies said.
The Federation of Small Businesses (FSB) fears that late payments, high inflation and the growing administration of companies that trade internationally will drive the numbers down if nothing is done to address these issues.
Of the 1,271 small business owners surveyed as part of an FSB study, 30% said late payment of invoices had increased in the past three months, while an additional 8% said they were doing so. faced with other means for which they were not paid on time.
Only 6% said a change in payment terms was agreed to during this time, and 8% of small business owners said late payments now threaten their business success.
FSB National President Mike Cherry said: “The size of the small business community has shrunk over the past year and, unless action is taken now to address the challenges it faces, history is about to repeat itself. “
Up to 440,000 people could be forced to close this year just because of late payments, according to the FSB study.
It comes as 2021 has been a year of declining confidence among those business owners that has not improved during “another uncertain holiday season,” the FSB said.
Pessimism is strongest in the retail, accommodation and food industries.
This is at a time when 78% of small businesses are saying costs are rising, with payments for expenses like fuel and utilities at their highest level since 2014.
With comprehensive import controls and rules of origin requirements now in place for companies doing business in the EU, 74% of small exporting companies said international sales were flat or declining in the last decade. over the past three months.
Some 38% of these companies reported a drop in their exports.
The FSB has previously said that only one in four small importers are fully prepared for new import controls.
Mr Cherry, who said small businesses face a series of negative flashpoints, added: “Today is a new wave of administration for importers and exporters – in three months , it will be an increase in the employment tax which is national insurance contributions, an increase in the taxation of dividends, corporate tax bills and an increase in the national living wage.
“On top of that, operating costs are rising – many will soon try to strike energy deals without the clout of big business or the protections afforded to consumers.
“Small business confidence has fallen in every quarter of 2021.”
Late payments had “destroyed thousands of small businesses” before the pandemic – which made matters worse, according to Cherry.
He added, “If this government is serious about leveling up, it must seriously help community businesses that are struggling to make ends meet as costs rise.
“Raising the cap on small business rate relief to £ 25,000 would take a total of 200,000 more businesses out of this regressive tax, mostly in the target areas of leveling, which means more investment, recruitment and retention within local economies from top to bottom of the country. “
The government has yet to announce its response to a consultation on the new powers of the Small Business Commissioner, an office set up to tackle late and unfavorable payment practices in the private sector.
Among the issues raised was the power to order payments and impose fines.
Changes were also made last year to the Quick Checkout Code, a voluntary program in which companies commit to making payments on time and treating suppliers fairly.
Businesses that join the program are required to pay small businesses within 30 days.
A government spokesperson said: “The government is making important reforms to help small businesses get paid on time, including halving the time to pay in the prompt payment code and looking at fines and the like. new powers for the small business commissioner.
“There is a lot of help available to ensure that small businesses are well placed to comply with UK border processes, including personalized advice through the Export Helpdesk. “