Late Payments Delay Recovery for SMEs
June 25th, 2012 by ismeireland• Contrived delays from Big business and State agencies mean Small Business waiting 69 days average for payment.
• 10 year old prompt payments legislation killing SMEs.
• 84% of respondents favour a mandatory 30 days payment with no exceptions.
• “Fair Payments Charter” needed in absence of workable prompt payments legislation.
ISME, Monday 25th June 2012.
ISME, the Irish Small & Medium Enterprises Association, has warned that smaller enterprises are being placed under severe pressure by deliberately delayed payments. The Summer SME Credit Watch Survey, released today (25th June) clearly shows the disastrous predicament in which vulnerable SME businesses are finding themselves, due to lack of normal payments for goods and services. The current government refuses to tackle this issue, as businesses go to the wall and jobs are lost because of totally inadequate legislation.
Three quarters of respondents favoured a MANDATORY 30 DAY PAYMENT. (on the assumption that ALL businesses are obliged to pay within 30 days of end of month of invoice. NO EXCEPTIONS), with 13% – ‘Don’t know’. When the “Don’t knows” were excluded a massive 84% were in favour.
According to ISME Chief Executive, Mark Fielding, “the latest figures aptly demonstrate the effect that late payments are having on SMEs, in that the main victims are small businesses, caught in vicious cycle of non-payment. While the main government departments have improved their payment days, the main offenders are the state agencies and big business where delays continue to put massive pressure on SMEs”.
“If this government is serious about helping small and medium businesses, then an immediate change to the current legislation is required to discard the ‘opt out’ clause used by big business and, over a period of time, create a level playing field. Only then will SMEs improve their cash flow, thereby reducing their need for bank loans”.
The main findings from 700 respondents in the week ending 22nd June are:
• 84% of SMEs favour a statutory 30 day payments regime, with no opt out.
• Actual average payment period in Ireland for SMEs is 69 days, a slight improvement on the previous quarter at 71 days.
• 38% are experiencing delays of 3 months or more, (Q1, 2012 40%).
• 10% waiting over 120 days, a small improvement on the March figures at 12%.
• A net 32% of businesses are waiting longer, (Q1, 2012 35%).
• Both big business and state agencies continue to increase the credit taken.
• Ulster businesses wait longest, at 78 days, while Dublin remains the best at 66 days.
• Construction and Distribution businesses wait on average 73 days while Services continue to improve at 66 days.
The Government’s Action Plan for Jobs is very weak on any proposals to improve the situation as they bend under pressure to maintain the status quo from the big business lobby group IBEC, favouring the accountancy driven large businesses, and allowing them to dictate credit terms to their smaller suppliers.
ISME proposes the introduction of a statutory 30 day payments regime for all business without exception. This could be introduced on a phased basis over 3 years, as follows
Year 1 60 days.
Year 2 45 days.
Year 3 30 days.
The Association called on the Minister for Jobs, Enterprise and Innovation to;
• Prioritise the review of the 10 year old Prompt Payments legislation, which should be amended to assist rather than crucify the SME sector.
• Begin the process of reducing the statutory payment days to 30, as per the ISME proposal.
• Introduce, publicise and champion a Fair Payment Charter for all businesses.
• Insist on adherence to Fair Payment Charter as criterion for granting state contracts.
• Insist that state agencies adhere to the 15 day rule.
• Insist on publication of payment data as instructed.
• Government should ‘name and shame’ those who pay SME businesses late.
• Increase the limits of the Small Claims Court to €20k, from the current paltry €2k.
“The abuse of dominance by large business and state agencies must be stopped and the fact that the banks are refusing normal access to credit for SMEs, means that the indigenous small enterprises are genuinely struggling to survive, despite the fact that they are viable, although vulnerable. The ISME recommendations, which would allow all businesses to predict their cash flow, introduce a level playing field for all credit transactions, reduce reliance on bank finance and bring down the cost of doing business, should be introduced by Government,” Fielding concluded.
ENDS
For further information contact:
Mark Fielding
Chief Executive
Tel: 01 6622755
Mob: 087 2519675
