Two thirds of construction companies admit that they pay their own suppliers late while one in three have come close to going out of business due to late payments, a survey has revealed.
In the survey of 500 UK small businesses conducted by Graydon UK, in partnership with the Forum of Private Business (FPB), it is revealed that those in the construction industry were most likely to see late payment as a significant problem (53 per cent) compared with around 20 per cent of retailers, distributors and restaurant owners.
Construction companies were most badly affected by late payment - in total 31 per cent of construction companies reported that they had almost gone out of business, compared to 19 per cent of manufacturers, 17 per cent of business services organisations and 5 per cent of retailers, distributors etc.
The survey also shows that businesses in construction (69 per cent) and manufacturing (63 per cent) were most likely to have paid a supplier late. Unsurprisingly, the most common reason for paying suppliers late was because they had in turn been paid late by their customers, highlighting the impact of the ‘domino effect' of late payment in the supply chain.
Profitability was also a huge factor for construction companies as 46 per cent said that they saw their profit margins eroded due to late payment. Late payments also hit the construction industry badly in terms of delaying innovation (35 per cent).
Phil Orford, Chief Executive of the Forum of Private Business, said:
"The research shows just how damaging the late payment of invoices is for small firms across every sector. It decimates cash flow, kills growth and innovation and ultimately forces businesses to the wall.
"We need to do two important things - first, communicate to business owners exactly what they can do proactively to minimise late payment, including putting in place robust cash flow management procedures and even simply invoicing properly and on time, then we need to provide the support and services they need to make tackling late payment a standardised business process.
"Second, we need to persuade large corporations to embrace paying their suppliers on time and in full, avoiding the temptation to impose damaging, retrospective changes to terms and conditions, so that prompt, proper payment washes down the supply chain.
"These are the aims that are squarely in our sights and we are committed to working with the Government and other agencies in order to achieve them."
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