The UK’s poor supply chain practices put SMEs out of business says a new report from the FSB.
The report, ‘Time to Act: The economic impact of poor payment practice, says British SMEs are owed a massive £67.4 billion in unpaid invoices and these late payment practices force an estimated 50,000 firms out of business each year.
Poor supply chain practices also push SMEs into rushed financing decisions. When cashflow is tight businesses tend to accept the first cash they are offered and this means they can end up locked in expensive finance arrangements.
The report says SMEs have been neglected for too long and if late payments were eradicated the economy would benefit by an estimated £2.5 billion each year. Large corporations have a duty to act and the boards of these companies should be properly accountable for their payment practices.
In a new scheme announced today, the Department for Business, Energy & Industrial Strategy (BEIS), has told large corporations they must publish their payment practices and performance data on its website.
The scheme will start in April and corporations and their directors that do not disclose their treatment of suppliers could face criminal proceedings and fines.
Chris Burgess, Chairman of FSB Merseyside, West Cheshire and Wigan, said:
“Payment culture is set at board level and supplier interest must be represented at the top of the chain. It’s something CEOs and board members in big businesses must take responsibility for. Big businesses should respect the supply chain and stop using smaller businesses as a credit line by delaying payments and applying bullying tactics.”
“There is a real danger that we are creating a business culture in the UK where it is acceptable not to pay SMEs on time. All too often large companies ride roughshod over their small suppliers by not paying them on time or in full, which has a chilling effect right across the economy.”