Overdue payments boost for SMEs

SMEs are receiving overdue payments at the quickest rate for nearly five years, according to a study conducted by lobby group Isme.

Overdue payments boost for SMEs

However, the findings show that nearly 40% of small firms are still waiting for three months or more for due payment.

Isme’s latest quarterly SME Credit Watch Survey — published this morning — shows that small- and medium-sized firms were waiting, on average, 66 days to be paid by clients during the second quarter of the year.

This was down from 67 days in the first quarter and marks the shortest average pay duration since late 2008.

Despite this, 36% of SMEs are experiencing payment delays of at least three months. The 66-day payment average is mainly for manufacturing firms.

According to Isme, distribution and wholesale companies are still waiting for up to 73 days for payment.

An overwhelming 82% of small firms are also in favour of a mandatory 30-day payments regime.

Isme chief executive Mark Fielding has welcomed the headline improvement in payment times and the Government’s progress on the new code of conduct on prompt payments, which he said should have a positive effect on cashflow for SMEs.

However, he criticised employers’ federation Ibec for not getting behind the code, warning that it can only work if big business is forced to adopt the guidelines.

“The fact that Ibec has refused to be involved in this code initiative is a challenge to Government, as big businesses are the main culprits in late payments,” Mr Fielding said.

“Government must, therefore, bypass Ibec and exert pressure on the multinationals, large businesses and state agencies, through the IDA and Enterprise Ireland.”

Mr Fielding and Isme are also “challenging” Ibec to “demonstrate its willingness to be part of the revival of the economy”, by signing up and embracing the new code.

“It may be a belated chance for them to don a real green jersey and discard the tattered, torn and faux version worn during the duration of the ‘partnership fiasco’,” he said.

The Government has just announced that it has agreed a formal text for the prompt payments code, which is being jointly developed by the Department of Jobs, Enterprise, and Innovation and various representative bodies.

Small Business Minister John Perry said the development of such a code marks “an important step in addressing the culture of late payments in Ireland”.

“The introduction of this code will continue the Government’s drive to get credit flowing in the Irish economy, by encouraging prompt payment for all business transactions,” he said.

Mr Perry added that the Government is acutely aware of the importance of the small business sector.

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