More than half (54%) of small businesses in the UK have had issues with their cashflow compounded by the late payment of invoices in the third quarter (Q3) of 2022, according to the FSB’s Small Business Index.
The research showed that late payment is a particularly severe issue for business-to-business (B2B) firms. More than two-thirds (67%) of small manufacturing businesses were affected by late payment.
Charles Jarrold, CEO of the BPIF, told Printweek that the association had asked the government to require all public sector suppliers to sign up to the Prompt Payment Code, under which suppliers agree to pay within 30 to 60 days.
He said: “Right now, late payment is again featuring in the top 10 concerns from members that we survey quarterly: it’s always an issue, but is rising in prominence.
“The issues arising from late payment are insidious - both on the cashflow of businesses, but equally importantly in the risk of bad debts. Typically, delayed payments mean more debt outstanding as well as a greater risk of default.”
One group that monitors bad debts is ICSM. A business credit intelligence group that specialises in print and related industries, it has seen a growing list of businesses in trouble from its weekly members’ accounts.
CEO Ian Carrotte told Printweek: “For years I have said one of the issues in the print industry is the tradition of ‘my word is my bond’ - and still too many printers will take a handshake instead of a written contract to confirm a contract.
“[A lack of paper trail] leaves many firms vulnerable to sharp practice. Every time the likes of Debenhams or Top Shop go down, they leave a trail of unpaid invoices.”
No-one with a bad debt would ever be likely to go public with it, he added, as it would scupper their remaining trade.
Carrotte suggested that German-style legislation, where creditors have the right to apply a higher rate of interest to invoices overdue by more than 30 days, would be a welcome step towards fixing the issue.
“My advice as always is to put customers on stop if they fail to pay on 30 days - or whatever your credit terms are - and on larger contracts to negotiate a part upfront payment schedule so you are not exposed to a larger debt if the worst happens.”
Alison Branch, managing director of eco-friendly printer Park Communications, told Printweek that not being shy about asking for upfront payment had served Park well when it had concerns.
She added: “It can be the largest customers who are the slowest payers - some would seem to have multiple layers within their online invoice processing and approval system which means that invoices can get stuck.”
Prevention, she continued, is the best cure: credit checks, agreeing terms up front, and understanding the customer’s invoicing procedure - including which legal entity to address it to - is hugely important.
Another print boss told Printweek that his company had tightened up on its credit terms during Covid, and had had no issues with late payment since.
“We’ve got everybody locked down on credit terms and limits, we’re all over it [...] we’re getting paid quicker than we’ve ever been paid.”
Part of this success, he said, was setting terms clearly at the beginning of deals. The company has also reduced its terms to 30 days, rather than 60.
“Because everybody’s in the same boat, everybody accepted it,” he added.
Carrotte summed up his advice for printers: “Put everything in writing – keep an email trail – and maintain strict financial discipline as it will get a healthy business through tough times.”
