Sunday, January 17, 2021

Large businesses taking longer to pay bills as COVID cash crisis begins to bite

The average time it took large businesses to pay supplier invoices lengthened by two days in Q3 in a sign that the COVID-19 cash crisis is beginning to bite, new analysis from accountancy and business advisory firm BDO has shown.

BDO’s quarterly Payment Performance Tracker, which analyses the payment practices of large UK companies, has revealed that the average time it took to pay suppliers rose to 35 days in Q3 2020, up from 33 days in Q3 2019.

Meanwhile, the proportion of invoices not paid within agreed terms rose to 29%, up from 26% in the same period last year.

Since 2017, large businesses (generating two or more of annual revenues in excess of £36m, a balance sheet value over £18m, or more than 250 employees) have been legally required to publicly report on their payment practices and performance every six months.

The latest data for Q3 shows a 23% year-on-year drop in the number of reports posted on time on the Government portal. While this may be due in part to key staff being absent through furlough or sickness, the lower number of reports may also be blurring the real picture of payment performance.

BDO has warned that the recent deterioration in payment processing times risks getting worse in the New Year, impacting the cash flow of suppliers and threatening the survival of some small firms.

The hospitality, retail and manufacturing industries were among the sectors recording the biggest declines in payment performance. The average time it took hospitality businesses to pay jumped from 38.5 days in Q3 2019 to 46.7 in Q3 2020, while retailers climbed from 39.1 to 43.8 days and manufacturers rose from 44.6 to 46.1 days.

Conversely, payment performance by public sector bodies showed signs of improvement with the average percentage of invoices not paid within agreed terms dropping from 23.2% in Q3 2019 to 19.8% in Q3 2020. This was likely due to new procurement guidance issued in March which directed contracting authorities to pay all suppliers as quickly as possible to maintain cash flow and protect jobs.

The Government has recently taken further action to try and address the issue of late and unfair payment practices. In October 2020, the Small Business Minister launched a consultation on giving greater powers to the Small Business Commissioner (SBC) to order businesses to pay in good time and to issue fines if they fail to do so. The SBC is also seeking to strengthen the Prompt Payment Code (PPC) under which signatories would commit to pay 95% of invoices from smaller businesses within 30 days. Currently they agree to pay all suppliers within 60 days.

Tim Foster, a risk advisory partner at accountancy and business advisory firm BDO said: “COVID-19 is clearly placing great strain on cash flow and we are beginning to see the first evidence that larger businesses are taking longer to pay their bills. Unfortunately, delays at the top of the supply chain can trickle down to SMEs and in some cases threaten their survival.

“The Government estimates that there is over £23 billion worth of late payments currently owed to small businesses in the UK. With many businesses unable to trade and the prospect of national or local lockdowns being extended, the problem of late payments could become more acute as we go into next year.

“Larger businesses can often struggle to pay promptly because of complex internal processes. However, there is arguably a moral obligation on those with adequate cash reserves to play fair and pay their smaller suppliers promptly. Many could do more to improve their working capital management, and adopt a more collaborative approach in order to prevent a culture of late payments being passed down the supply chain.

“Government initiatives to encourage fair payment practices have helped small and medium sized businesses, but we’ve recently seen a drop in compliance. This suggests that either compliance activity has been pushed down the list of priorities since the pandemic hit, that actual payment performance may be worse than reported, or both.

“Where SMEs can do more to help themselves is by researching their customers’ payment performance on the Government portal, making sure they send their invoices in promptly, and checking that there are no errors as disputes can often lead to delays in payment processing times.”

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemichaving a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £31.50 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.




Latest news

Leeds property firm makes four new appointments

Independent property firm, Adair Paxton, has appointed four new members of staff across its residential and commercial property divisions. Michelle Green, has been appointed as...

Supreme Court rules in favour of small business claims against commercial insurers

In good news for small firms, a Supreme Court ruling will see thousands have their disputed COVID-19 business interruption claims paid. It is expected that these...

Preventative healthcare specialist completes double acquisition of Lincs companies

Preventative healthcare specialist PAM Group has completed a double acquisition as it continues its buy-and-build strategy. The Warrington-based group has bought 66Fit and Physio Supplies...

2021 Business Predictions: Keith Hardman, Head of Cushman & Wakefield’s Leeds office

It’s that time of year, when Business Link invites the region’s business leaders to offer up their predictions for the year ahead. It has become...

Yorkshire manufacturers urged to have their say on life after Brexit

Small to medium-sized (SME) manufacturers in Yorkshire are being encouraged to have their say on trading beyond Brexit as part of the latest Manufacturing...

Bradford food manufacturer secures £90k grant

The Regal Food Group has secured £89,391 of grant support from the Leeds City Region Enterprise Partnership (the LEP) towards the expansion of its production facility and is creating 30 new jobs. Regal Foods is a well-established food manufacturer that has...

Related news

Supreme Court rules in favour of small business claims against commercial insurers

In good news for small firms, a Supreme Court ruling will see thousands have their disputed COVID-19 business interruption claims paid. It is expected that these...

Preventative healthcare specialist completes double acquisition of Lincs companies

Preventative healthcare specialist PAM Group has completed a double acquisition as it continues its buy-and-build strategy. The Warrington-based group has bought 66Fit and Physio Supplies...

2021 Business Predictions: Keith Hardman, Head of Cushman & Wakefield’s Leeds office

It’s that time of year, when Business Link invites the region’s business leaders to offer up their predictions for the year ahead. It has become...

Yorkshire manufacturers urged to have their say on life after Brexit

Small to medium-sized (SME) manufacturers in Yorkshire are being encouraged to have their say on trading beyond Brexit as part of the latest Manufacturing...

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close