Late payments ‘putting smaller firms at risk’

Late payments are continuing to threaten the future of many SMEs, while the change in examinership laws is not having the desired effect on smaller businesses either, two separate studies have found.

The latest credit watch survey from representative body Isme, covering the first quarter of this year, shows that the average waiting period for outstanding payments for SMEs has inched up from 55 days to 59 since the end of last year.

Isme said that 86% of SMEs favour a statutory 30-day payments regime, with no opt out.

It added that a “lack of government intervention” is putting businesses and jobs at risk and that the current voluntary code of conduct needs better promotion.

According to Isme chief executive Mark Fielding: “The vital cash flow for SMEs is being hampered by late payments from big business and state agencies.

"While this fact has been acknowledged in the Government’s Action Plan for Jobs, nothing has been done to improve the situation and once more the SME sector is ‘thrown to the wolves’.

"The introduction of the fair payments charter is but a fig leaf to cover the inability of Government to do anything to rectify the deteriorating situation, as accountancy-led big business simply ignore it.”

Isme’s findings show that 24% of SMEs are experiencing delays of three months or more for payment; up from 15% in the final quarter of 2015, while the amount who are waiting for 120 days or more has remained stable at 4%.

“It is essential that all businesses — and in particular small business — be in a position to predict their cash flow with some degree of certainty,” said Mr Fielding.

Meanwhile, new figures from Deloitte show 251 corporate insolvencies were recorded in the first quarter of the year; in line with the same period last year.

While there was a decline in the rate of construction-related company failures during the first three months of 2016, there was an increase in insolvencies in the services sector.

Of note was the trend in insolvency types, with creditor’s voluntary liquidations accounting for the vast majority of latest cases and examinerships continuing to remain at “disappointingly” low levels.

“The first quarter saw only two examiners appointed out of the 251 corporate insolvencies, less than 1%,” noted Deloitte.

“This level of examinership take-up is consistent with the comparable periods and shows that the introduction of new legisation in early 2014 has not had the intended effect of encouraging more struggling SMEs to avail of this more cost-effective and accessible option,” it added.

The allowance to apply for examinership via the Circuit Court instead of just the High Court was supposed to see average examinership costs fall by 30% and enable firms with less than 50 employees and sales of under €9m to avail of the service.