HSE payment policy criticised

THE Small Firms Association (SFA) has launched a strong attack on the Health Service Executive (HSE) over its payment policy.

SFA director Patricia Callan launched her criticism after a new survey found late payments are crippling small firms that are struggling to stay afloat in the current tough trading environment.

“It is appalling that the HSE, in its terms and conditions, has set out a payment period of 45 days,” she said.

That contravenes commitments given by An Taoiseach and An Tánaiste that all central government departments would pay bills within 15 days and all other state bodies and local authorities within 30 days, she said.

Late payments in Ireland are worsening and are compounding an already difficult financial environment for many small firms, she added.

The survey of credit conditions highlights the challenges confronting Irish-owned businesses, the bulk of which fit the small or medium-sized business category.

Ms Callan said the startling fact is that “in Ireland, from the time a firm issues an invoice to the date it is settled, is now on average 75 days, up from 66 days in the autumn survey.

While 64% of businesses said late payment impacts on their cash- flow, 48% of companies have experienced an extension of credit terms taken by clients in the last three months.

“The result is that the cost of doing business will increase, as many companies will have to resort to debt finance, such as overdrafts, to facilitate their cash-flow requirements, and that is if they can actually get it,” commented Ms Callan, adding that, “with 22% of respondents reporting a decrease in working capital availability from the banks over the past three months and 14% reporting an increase in the cost.” Points arising from the survey include:

* SFA calls for establishment of Small Claims Court for business.

* Average payment in Ireland takes 75 days.

* 56% of small firms offer credit terms of 30 days or less.

* 64% of companies experience late payments on their credit terms.

* 33% of those companies take up to 30 days extra than what is offered, with 21% taking between 30 and 60 days extra.

Despite the introduction of an EU directive allowing companies to automatically charge interest penalties on accounts outstanding beyond 30 days, Ireland’s average payment period is one of the slowest in Europe, she said.

Late payment regulations allow for an interest penalty to be automatically applied to overdue payments, but only 16% of survey respondents had such charges in their terms and conditions.

“One of the key difficulties is enforcement of rights under the Late Payment in Commercial Transactions Regulations, 2002,” said Ms Callan.