Small business growth hampered by exploitative payment terms of ‘big fish’
For most SMEs, winning a contract with a big company is a cause for celebration. But the celebrations can soon turn sour if the bargaining power of the ‘big fish’ means that the ‘small fry’ ends up waiting months for payment.
Few small companies want to risk alienating their biggest clients, and frequently accept payment terms of up to 120 days, placing a strain on their finances and, in some cases, threatening their survival.
According to new data released by payment processing firm Bacs, SMEs are owed £35billion because of exploitative payment terms imposed by their biggest customers. And small businesses are struggling with the knock-on effects of waiting months for their hard-earned cash.
This week, the Federation of Small Businesses, the Forum of Private Business and the Institute of Credit Management, along with Labour MP Debbie Abrahams, have written to the 75 FTSE 100 members that don’t yet adhere to the Prompt Payment Code – a voluntary scheme that promotes good payment practice – asking them to consider the issue and its effects on the economy as a whole.
The Sunday Telegraph had previously highlighted mega-companies such as FTSE 100-listed Reckitt Benckiser who insist on 120-day terms, IT firm Dell paying 18 days late on 90-day terms and the private health giant Bupa paying after 130 days (although the latter pointed out that its standard terms are 45 days from the end of the month).
Read more on the Daily Telegraph website