Why you face longer waits for payment
Companies should take excessive payment delays as a warning of a customer‘s financial stability, a study by credit-rating agency Experian claims
Small companies now face longer waits for payment than at any time since late payment legislation was introduced in 1998, according to research by credit-rating agency Experian.
Businesses now take an average of 61 days – more than two months – to pay their bills, the study shows, an increase of almost two days since November 2006.
Small firms tend to be best at paying their own bills, Experian’s study showed, perhaps because they feel they have less leverage over suppliers. Small firms take an average of 60.2 days (up two from November 2006), with medium-sized companies taking 61.3 (up one day) and large businesses taking a massive 81.5 days.
“Businesses need to be increasingly cautious about trading with companies that have a poor or erratic payment performance record,” said Jo Howard, marketing director of Experian’s business information division.
“More alert companies are more likely to take steps to screen out poor performers from their new business activity and check for default or late payment among new and existing customers so they know who they are dealing with and are forewarned of any potential problems.
Businesses need to be increasingly cautious about trading with companies that have a poor or erratic payment performance record
“At the same time, they might be trading with a very creditworthy and sound business that has a culture of late payment,” she added. “It pays its bills, but traditionally later than its peers in its industry. Here, a business can be prepared for late payment or take steps to change its payment terms to encourage faster payment or develop more creative collection strategies.”
The slowest paying industry is the electricity trade, which takes an average of 72.1 days to pay its bills, the survey found. This was followed by property, at 70.2.
The promptest payers can be found in the agriculture, fishery and forestry industry, with an average of 54 days.
“Data on how fast companies pay their invoices is a valuable early warning indicator of cashflow problems,” added Howard. “Those running businesses need to be aware that the longer the payment period is, the more money they have outstanding that could be lost.”
