Being your own boss can be a wonderful thing, and a report released last week reveals that a lot of entrepreneurs wouldn't dream of giving up the perks involved. In fact, just 4% of those surveyed by Aviva would consider going back to work for someone else, but despite this renewed optimism it can still be incredibly stressful.
One particular hurdle small business owners are facing is late payment, especially from larger companies. The Federation of Small Businesses (FSB) has found that over half of their members (51% of those surveyed) were paid late last year, and are calling on the Government to ensure more can be done to stop the practice.
Late payment isn't always a one-off either. Some larger companies are repeat offenders and even extend payment terms to as much as 120 days, which can have a huge knock-on effect for smaller firms. Some 34% of those affected found that late payment reduced profitability while 32% had to pay their own suppliers late, and 29% reported that it restricted business growth.
The EU Directive states that only in "exceptional circumstances" should payment terms be more than 60 days, but despite this just 12% of those surveyed charged interest on late payments – even though they're legally entitled to do so – with fear of losing business a key driver behind this level of acceptance.
The FSB is therefore urging the Government to reinstate its Prompt Payment Code (PPC) website and publicise it more widely, ensuring that smaller companies know they can complain about larger firms who continue to pay late, while strengthening the code to ensure those companies have more responsibility for prompt payment.
John Allan, national chairman of the FSB, said:
"As the economy gets stronger we must do everything we can help businesses and late payment is an issue the Government and large businesses must tackle. Small businesses simply can't be expected to lend interest-free to their large customers, which is in effect what extended payment terms and late payments results in… [they] need confidence to charge interest and complain about late payments.
"We have urged the Government to look at strengthening the Prompt Payment Code so it is mandatory for the largest businesses to spell out their payment terms, as well as agree to pay quickly, and for large businesses to take seriously their responsibility to pay on time."
Late payment can be a huge burden, so if you're suffering cash flow issues or are looking for ways to fund your growing business why not consider alternative finance options?
Find out more about:
Bridging finance and,
commercial mortgages to see if you can grow your business without late payment holding you back.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.