Late payment ‘strangling’ small firms

THE first three months of 2010 could see a significant increase in the number of small firms going bankrupt, due to a lengthening in the period of time it takes them to get paid by customers.

In launching its winter 2009 credit watch survey ISME (the Irish Small and Medium Enterprises Association) branded the late payments legislation – which was introduced in 2002 – “a sham” and accused the Government of continuing to turn a blind eye to the plight of SMEs, as the late payment issue worsens.

The organisation is calling for the Government to properly enforce the legislation “as intended with no exceptions”. It also wants a mandatory guaranteed 30-day payment deadline scheme put in place.

Results of the latest ISME survey suggest that average payment waiting periods have actually become longer since the legislation was introduced.

Just under 60% of respondents said they are routinely waiting for payment for an average of 75 days, while just under 50% said they generally have to wait for more than three months to be paid.

According to ISME, the situation is slowly strangling successfully trading small firms in taking away their lifeblood, cash-flow.

“The fact that so many small and medium companies are being forced to wait longer for payment shows not only that the seven-year-old legislation is useless, but that it actually aids and abets larger entities in delaying payments; squeezing small business. The Government’s inactivity is disgraceful and will hasten the demise of many small enterprises and throw more workers on the dole,” said ISME’s chief Mark Fielding.

Mr Fielding said that because the payment situation has worsened, many small businesses are now technically “on the edge” and the first three months of the new year could see many becoming bankrupt.

“The situation is continuously deteriorating as the delays have increased from 50 days at the introduction of the legislation to 60 days in the autumn of 2007 to the current excessive 75 days. The main culprits are large businesses who abuse their dominant position and take longer credit, thereby starting the domino effect down the supply chain.”

SMEs in Ulster have had to wait longest for payment, this winter; closely followed by those in Munster and then Leinster.


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