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Invoice payment abuse cited by FSB. Large companies are exploiting small businesses by delaying invoice payments and imposing new terms and settlement fees on owners, the Federation of Small Businesses (FSB) can reveal.
The FSB has unearthed evidence that big organisations are unashamedly making smaller firms wait over 100 days before getting paid, often changing terms and conditions with little notice.
In one example, the high street chain Alliance Boots wrote to its suppliers in June to inform them that, as of April 2008, bills would be paid up to 75 days from the end of the month of invoice with a 2.5% settlement fee.
There is existing legislation which allows small business owners to charge interest on late payments, but many are reluctant to use this for fear of losing contracts with big businesses on which they are often reliant.
John Wright, FSB National Chairman said, “big companies appear to be aware that small businesses are afraid of taking them on over payment terms and are abusing their power as a result. Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous."
The findings are alarming for start-ups, coming at a time when small businesses are finding it difficult to deal with a slowing economy and rising costs. Wright says it is shocking that large companies think it is acceptable to use them as an unofficial source of credit.
However, smaller businesses should be made aware that the Invoice and Asset Based Lending industry has been helping the SMEs bite back against the credit crunch.
Peter Ewen, Managing Director of premier Invoice and Asset Based Lender Venture Finance says, "amidst all these stories of financial woe, it is important to recognise that help is available for SMEs, dealing with larger corporate customers that are damaging SME cashflow through enforcing extended payment terms.
Ewen went on to say that the Invoice and Asset Based Lending industry is helping Britain's SMEs stand up for themselves and survive the present economic climate.
Businesses across the UK are achieving stability and growth through alternative funding options like Factoring, Invoice Discounting and Asset Based Lending (ABL). All can help increase working capital dramatically by paying an advance of up to 95% of the invoice value to a SME, as soon as it is raised meaning no more waiting 30, 60 or even 90 days for payment.
The benefits need to be recognised, both by struggling SMEs as well as the wider business community and commentators. Ewen said there should be a focus on enabling businesses to fight back for the good of the UK economy, "and stare adversity in the face by proving the doubters wrong."
Ewen says research shows that the popularity of ABL has surged by 50 per cent in the last 12 months as businesses that have been refused credit from high street traditional lenders look elsewhere during these tough times. He predicts that these figures will continue to rise as 2009 approaches.
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