More than a quarter of all invoices are still being paid late, despite the introduction of new payment practices reporting regulations, according to research for the Chartered Institute of Credit Management (CICM)
Analysis of the first returns from large firms by Graydon, the credit information and data intelligence business, showed that the average reported time to pay was 38.97 days with just over half (51.71%) paid within 30 days. A third (33.02%) were paid between 31 and 60 days, and 15.25% were paid later than 60 days.
However, CICM says the most troubling statistic is that 27.26% were paid beyond the agreed terms.
Philip King, chief Executive of the CICM, said: ‘The biggest issue for many SMEs is not the length of payment terms but the certainty that payment will arrive when they expect it. Often, payment of a large supplier, the rent, or the wages are dependent on a large invoice being paid.
‘If more than a quarter of invoices are being paid late then the suppliers are seeing a hole in their cashflow which is worrying, at best, and can be catastrophic. For many small businesses, it’s about more than just the balance sitting in the current account.’
King warned, however, that SMEs needed to look carefully at the figures provided. For example, one company reported that zero invoices are paid late, which seemed positive, yet the average time to pay was 69 days, and only 7% of invoices were paid within 30 days. Its maximum contractual payment terms are 75 days.
In contrast, another company reported paying 57% of invoices outside the agreed terms, yet 52% within 30 days, 28% between 31 days and 60 days, and 20% over 60 days. Its average time to pay was 56 days.
King said: ‘How you interpret these figures is dependent on your point of view and what is most important to you.
‘It is easy to draw conclusions that might be misleading – both good and bad. Sometimes you need to read between the lines.’
The payment practices reporting regulations came into effect on 1 April 2017 and apply to any companies and LLPs that exceed at least two of three thresholds in the last two preceding financial years: £36m annual turnover; £18m balance sheet total; 250 employees.
Reporting is due within 30 days of each six month period and will be aligned with the business’s key financial reporting date. This meant companies with an April year end are the first to report, with a deadline of 30 November 2017, and those who have published their figures include Stagecoach Services, Center Parcs, and The Carphone Warehouse.
Guidance on business payment practices and performance: reporting requirements is here.
Search for published payment practice reports here.
