A new report from the Federation of Small Businesses (FSB) has revealed that many small firms in the supply chain of public sector projects suffer as a result of late payment.
The study suggests that 25% of small businesses in public supply chains have experienced late payment more than 50% of the time, while only 12% have been provided with the necessary skills to support them. More from the blog: “Late payments remain a real problem for SMEs.”
The FSB has called on the government to introduce reforms to public procurement, in order to promote best practice and help ensure that large government suppliers pay on time.
According to FSB Chairman, Mike Cherry, recent market failures highlight the need to improve supply chain practices.
Mr Cherry commented: ‘Healthy supply chains are a win-win for businesses and tax payers as they create genuine competition, drive productivity, help close skills gaps and fuel economic growth’.
Understandably the biggest impact on small businesses is cash flow.
Being a smaller link in the supply chain often means less ‘buyer power.’ This can result in agreeing to longer payment terms from ‘bigger’ businesses, whilst being held to shorter payment terms from their own suppliers. Having to pay costs before receiving payment from customers in the short term can be manageable. The longer this trend goes on, the less cash there is in the business and the more likely debts can build up.
When debts start to become unmanageable it’s time to seek professional advice. Addressing the problem as soon as possible means you’re more likely to have several options to resolve it. As debts mount up and the situation becomes more critical, the options become more about business survival.
At HJS Recovery we’ve helped hundreds of businesses address debt problems, and restructure their business to get back on track. Call 0808 1644 222 to talk with our of our advisers today – all conversations are confidential. Alternatively contact us here and we’ll arrange a time to speak with you.