It is no secret that small businesses have been grappling with late payments across the European Union.
To add to that, a report this week from the U.K.’s Federation of Small Businesses (FSB) found that, even in the wake of the Late Payment Directive in 2013 — mandating that payment terms should not go beyond 60 days — as many as 85 percent of smaller firms are paid late. With a seemingly direct flouting of the Directive, 17 percent of small businesses are paid beyond the aforementioned 60 day window.
Those firms operate with European supply chains, according to the report, which also notes that more than a third of suppliers have seen their payment terms increased over the last two years.
Late payments were cited by 51 percent of SMBs as their highest risk, ahead of the 37 percent that said that “losing key members of staff” constituted the biggest risk. Roughly 12 percent of firms have been asked by their business partners if discounts were available if they paid on time.
Firms are experiencing what is being billed as “supply chain bullying,” stated the FSB. As many as 17 percent of firms had experienced such bullying, where the payment terms are being stretched and where business customers have been wielding power over those payment terms. When asked by the FSB about whether smaller suppliers felt able to influence the terms of contracts with customers, 39 percent of respondents responded in the affirmative, with another 24 percent saying no.
As many as one in five smaller suppliers are paid late more than half the time by the public sector.
The overall cost, as noted in the report, is £2.5 billion annually, and results in 50,000 smaller firms shutting their doors each year. The FSB has found that 37 percent of firms have had cash flow difficulties in the wake of late payments and 20 percent have seen a slowdown in profit growth.