Flash floods, office parties and armed robberies were also used to justify late payments. The less nimble witted cited cash flow problems and missing invoices. But a fertile imagination is poor consolation for an unpaid invoice. The amount owing and overdue to small businesses in the UK has been put at 20 billion. Owner-managers argue that most of this debt is created by larger customers using their economic clout to protect cash flow, preferring to delay payment rather than borrow from the banks.
Late payment is one of the main reasons why small, fledgling enterprises fail.
In the main they are the victims of bigger firms holding on to cash due to suppliers after agreed payment dates. Smaller businesses face the longest payment delays. Those with a turnover of less than 1 million have an average payment delay of 20 days in contrast to larger firms, which only have to wait nine days. Small, sub-contractors at the bottom of the pile suffer most and end up with a cash flow problem that can force them out of business. Customers who do not pay on time are required to pay interest charges, starting at eight per cent above the base rate, on the amounts owed.