‘Addressing late payment could boost Scottish economy by up to 3 per cent’

A poll carried out by activist group Business for Scotland has found that late payment is a bigger issue in Scotland than in the rest of the UK, with 38 per cent saying they regularly have problems with customers delaying payment and 41 per cent being made to wait 90 days or longer.

The group said that the impact on the economy is significant and believes addressing late payment with new legislation could boost the Scottish economy by up to 3 per cent.

Founder and CEO of Business for Scotland Gordon MacIntyre-Kemp said: “If there is one single economic/business policy area that, if successfully addressed would stimulate economic growth, employment and business profits, it is dealing with late payments to small to medium sized businesses.

“If the Scottish government wanted to generate additional 1-2 per cent GDP growth in a year rising to 3 per cent in year two, and at the same time create a more entrepreneurial economy, rapidly increasing new business start ups whilst halving small business insolvencies and business related personal bankruptcies, then addressing late payment is the place to start.

“Solving cash flow problems for these businesses is the single largest opportunity for economic growth and employment open to Scotland, and it’s really not that hard to do.”

15 per cent of SMEs polled by BfS said they regularly wait 20-30 days beyond the agreed payment terms and 19 per cent regularly wait 31-50 days.

80 per cent of respondents have not charged late payment interest as they are currently entitled to do by EU law due to fear of lost future orders, thus demonstrating that current voluntary rules do not do the required job. 86 per cent of the businesses polled would support a law making late payment charges mandatory.

One respondent said: “The biggest problem we have is that our customers are slow to pay us, because people are slow to pay them… In turn this obviously results in us being slow to pay our suppliers…”

Only legislation and not voluntary codes can cure this on-going problem.

67 per cent claimed that if late payment wasn’t a problem then their business would grow faster in the following year. 46 per cent predicted between 5-10 per cent growth, but the larger companies in particular thought they would grow faster with 22 per cent suggesting ending late payment would lead to more than 10 per cent growth and 7 per cent saying they would achieve more than 20 per cent growth.

Larger companies also ask suppliers for payment terms from 60-120 days or the small firms don’t get the orders. One business owner stated: “No point in even discussing terms with the corporates. You just accept their terms or you don’t get the business. And you don’t want to risk being labelled a trouble maker.”

Speaking to business owners, many claimed that they spent days every month chasing bills when they should have been adding value to their business, and even smaller companies with ten or less employers claimed that overdraft and admin costs related to and chasing late payments were costing them more than £1,000 a month.

Mr MacIntyre-Kemp added: “The beauty of addressing late payment is that no-one loses out and almost everyone gains, as all you are doing is forcing the late payers to honour the contract they have signed. And in the case of restricting large corporate demands for more than 30 days payment terms you are just forcing them to demonstrate fair and good business practices that they can well afford.

“There is an easy way to improve the situation in Scotland: the public sector was quoted as being the worst culprit for late payment, specifically mentioning the NHS and local Councils, and so extending the Scottish Government’s 10 day target and making it mandatory for all public sector bodies to pay suppliers in 10 days would put a dent in the problem and make Scotland a more attractive place to do business.

“Small businesses will hire more people and wages will rise slightly and there would be a significant increase in the velocity of money flowing through the real economy, a significant economic health factor.”