Late payment of commercial debt ‘getting worse’

A recent survey published by the Federation of Small Businesses (FSB) has revealed the late payment of commercial debt is getting worse, with more than half of small firms reporting late payment of invoices during the last three months of 2022 and 25% seeing an increase in late payments over the same three months.

Prompt payment of invoices issued by small businesses is not only key to that small firm being able to survive – it also hampers them from obtaining credit themselves and potentially expanding, delivering a wider blow to the UK economy.

Small businesses who contract with larger organisations are most vulnerable to the impacts of late payments, according to experts, as it is often larger companies that use their ‘weight’ in the contractual relationship and fail to pay in accordance with agreed payment terms.

Government figures reveal that the number of UK small firms has fallen by 440,000 since 2020 – down from a high of 5.9 million – and FSB says hundreds of thousands more are facing pressure from late payments.

Although a large number of companies have signed up to the Prompt Payment Code, whereby they commit to paying 95% of their invoices within 30 days, many do not follow this practice and there is currently no real penalty against them.

Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can claim both interest and compensation for every invoice that is paid late – but for many the process takes too long for them to ride out the pressures of late invoice payments.

The late payment of commercial debt is a problem Checkapayer is looking to solve. By providing a place for suppliers, contractors and freelance workers to search, rate and review firms’ payment promptness, the site is on a mission to make late payments a thing of the past.