HUNDREDS of small businesses are at risk of financial meltdown because of record waits to receive payments from larger firms.
Claiming that otherwise viable companies are being “strangled” by the financial delays, lobby group ISME warned that hundreds of firms are facing the prospect of going into liquidation due to the growing wait for payments.
According to the group’s latest credit watch survey results, based on the responses of 680 firms in the SME sector in the second week of April, small firms are waiting an average of 69 days to receive payment from larger organisations — more than double the legal time.
Just one out of five companies surveyed are paid within the legislative timeline, with a third experiencing delays of 90 days and one in 10 firms waiting 120 days for payment — four times the legally allowed wait.
The situation is most apparent in Leinster, Ulster and Connaught, with smaller firms waiting an average of 74 days for money related to work already carried out, while in Dublin and Munster the figure is 68 days — more than twice the legal wait.
Smaller firms have complained that they are not in a position to use legal steps to force other firms to give them the money they are owed, as such a step would result in a less secure relationship with the larger companies on which they depend.
However, calling for immediate action to be taken on the matter, ISME chief executive Mark Fielding said that changes must be made to existing prompt payment legislation to ensure that hundreds of small firms employing a large minority of staff are not forced to close their doors.
“This abuse of a dominant position amounts to an ‘interest free loan’ which SMEs are obliged to give to their much larger and economically stronger customers,” he said.
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