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"Late payments have forced me to refuse care packages that would have cleared hospital beds"

ended 25. July 2023

Late payments, by both corporates and Government, are crippling and even killing small and micro businesses. One small business owner, Tony Winch of home care provider, Home Instead, has even said: “Late payments by the Local Authority and NHS have forced me, as a business, to refuse care packages that would have cleared hospital beds.” 

Tony Robinson OBE, co-founder of the Micro Business Alliance, has also noted that “of the Prime Minister Rishi Sunak’s new 14-person Business Council comprised of CEOs of major companies, half of them do not #PayIn30Days or less.”

He adds: “We thought that self-employed people, freelancers and micro business owners were over the worst tragedy I've seen in my 30 years of campaigning for a level playing field for them. That tragedy was 3 million businesses being excluded from government income support during the pandemic. But it's worse now. We are waiting an average of 68 days for payment.”

Tony concludes: "A few hundred of our biggest companies, imposing 45 days to 120 days “take it or leave it payment terms” on their suppliers is a root cause of the cash flow crisis and unfair payment culture that kills micro businesses and strangles start-ups at birth.”

UK newswire, Newspage, sought the views and experiences surrounding late payments from a selection of small business owners and business finance experts, below.

11 responses from the Newspage community

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Kevin Winch
Director at Home Instead
Late payments by the Local Authority and NHS have forced me, as a business, to refuse care packages that would have cleared hospital beds. I have unpaid invoices going back over 18 months. I am now seeking to obtain payment legally. I have written letters of apology to potential clients, who we quoted for business telling them we can no longer offer care as I cannot take the risk of any non-payment by the Local Authority. It will not be cured until they are fined for their actions and the senior management take responsibility for the poor performance and inaction of their staff.
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Rachel Hayward
MD at Ask the Chameleon
Late payments are the number one killer of micro and small businesses. Business is tough enough without being paid late, or worse still, not at all. The Government should act by refusing to give public contracts to those companies that can not demonstrate publicly how they pay all of their suppliers within 30 days. Late payers must be called out.
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John Lamerton
Small Business Author at Big Ideas... for Small Businesses
I'm all for the Government tackling the unfair payment culture that's crippling small businesses. They should start with one of the worst offenders: His Majesty's Revenue and Customs. I was due a corporation tax refund earlier this year. HMRC took five months to process my refund. Just last week, due to an error on their end, HMRC collected my annual VAT payment twice, then told me it would be "up to two weeks, maybe longer" before I'd see the money back. Collectively, that's £16,000 that my business can't invest or use to keep the lights on, because it's sat in HMRC's coffers.
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Phil Chesham
Head of Invoice Finance at Time Finance
For small businesses, their relationships with customers are vital to surviving and paying the bills. This often makes them reluctant to chase unpaid invoices and damage those relationships. When a culture of late payment rumbles on like this, it creates a vicious cycle of cashflow problems. But without capital, businesses can’t pay their own suppliers, bills or, in extreme cases, employees. This domino effect can have a detrimental impact on a company's growth and survival. Our own research finds SMEs are owed up to a staggering £250,000 in late payments, and up to 70% wait longer than 60 days for their invoices to be paid. That’s too many businesses suffering with cash flow. What SMEs need is a shift in payment culture; the Prompt Payment Code is itself a voluntary initiative so drastic policy change is needed from the Government. If businesses are to sustain some level of growth, they need confidence in their business and financial headroom.
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Debbie Porter
Managing Director at Destination Digital Marketing
There is no good reason for larger organisations to withhold payments beyond 30 day terms when dealing with SMEs. The Late Payment of Commercial Debts Regulations 2013 aims to protect small suppliers from facing cash flow problems due to late payment of invoices. The default, if no other terms have been agreed, is 30 days after receipt of invoice. The U.K. Small Business Commissioner claims, “if small businesses were paid on time, this could boost the economy by an estimated £2.5 billion annually.” So why can’t we shift the needle on this? Whilst larger organisations will make a lot of marketing noise about their CSR programs, they ought to extend this energy into how quickly they turn around invoices for the SME end of their supply chains, too. It would have to be said that the worst offenders are Government-funded departments, from whom extracting cash takes an inordinate effort. So maybe the Small Business Commissioner should work on getting her own house in order first.
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Jenny Blyth
Small business owner at Storm in a Teacup Gifts
If I told the cashier at my weekly shop that I would be back in 30 days to pay for the goods I’ll be consuming that week, they would rightly ensure that it didn’t happen again. Micro businesses simply cannot wait for weeks on end to receive payments. That money is relied upon to pay bills, to invest in stock, to survive. Big businesses would never allow it, so why should we? Legislation needs to be put in place to treat businesses fairly. We might be small but we are mighty, so stop treating us otherwise.
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Keith Budden
Managing Director at Ensurety
For all small businesses, cash flow is king. We often don't have access to the overdraft and factoring facilities available to larger businesses. Wherever possible, we now seek to get payment in advance of providing our services, but for some clients, this is not an option, their accounts department is set up only to pay invoices in arrears, so it can be a case of put up or shut up. I fully agree that the Government should crack down harder on businesses that do not honour their own contracted payment terms. Yes, we can add penalty interest under current legislation but to most large businesses if you do that a) they regard that low cost of finance as a cost worth meeting and/or b) you find that you lose repeat business from that client. So yes, give us a stick to beat them with, but give us some back-up, too.
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Tasnime Rotherham
Founder at Very Craftea
When I used to work in the construction industry for one of the top tier companies, I saw first hand how increasing the payment terms from 45 to 90 days affected the small sub-contractors they employed. Within a matter of months, firms were either refusing to bid for work or went bankrupt trying to keep up with these terms. And this was before I even had my own business to worry about. 30 days is more than enough for any company to pay their suppliers. Anything longer than that is either down to poor cash flow or just being downright greedy.
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Chris Ramsbottom
Owner/director at The Amethyst Centre
I learnt a lesson in the 90s when I ran a beer agency. One of the Big Six breweries at the time launched a chain of pubs that branded themselves as "free houses" and we started to sell beer to one of them. However, when we started chasing payment we were told that their payment terms were 180 days. 6 months! Our payment terms were 30 days: they soon changed to cash with order or cash on delivery. I find it disgraceful that this is still the case in this country. I think some sort of legislation may be needed to force companies with a turnover of, say £25 million or more, to be required to pay 30 days from invoice. Many companies haven't changed their policies in 30 years, despite countless industry groups campaigning for them to do so.
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Mark Grant
Business Finance Adviser at The Business Finance Branch
Right now, cash flow is at best constraining, and at worst closing down many micro and small businesses. We help firms to do business where costs, such as staff, overheads and supply chain, are all up front and their revenue is up to 60+ days out from the point they invoice customers. They can't manage such long gaps in cash flow, but will the customer come back next time if they turn down the work now? The Government should pressure the biggest firms to pay micro and small businesses in their supply chain on 30-day terms. The economy needs businesses of all sizes to recover and thrive.
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Jon Cunningham
CEO at FlowFlows
Late payments have a huge impact on small business owners. It's not a case of having fewer reserves, as many of them are living hand-to-mouth anyway. Late payments can mean you might not be able to pay for fundamentals like electricity, gas, rent/mortgage or food. It's not always intentional. A culture of long payment terms within corporate organisations waterfalls down to companies, associates and freelancers and, sadly, it's often the least well-paid that suffer the most.