Northern Ireland SMEs are still facing late payments from suppliers, an issue which is ultimately putting their business at financial risk, according to a report by the Association of Chartered Certified Accountants (ACCA).
‘Ending Late Payment: Reflections on the Evidence’ is the third in a series of papers on the subject, and it highlights the need for policy-makers to rethink how they manage and regulate trade credit and late payment.
ACCA believes government and their policy makers have a big responsibility to build a financial infrastructure that diminishes late payment, and where trade credit can be boosted.
Regional spokesman Brian McGuire said: “Late payment is life-threatening for many organisations in Northern Ireland, and its impact on the small business community is most acute. Those with fewer than 50 employees are typically twice as likely as large corporates to report problems with late payment.
“But with the right intervention, late payment doesn’t have to be an issue for businesses. At its most basic level, late payment is a form of credit and in an ideal world, where all solvent businesses would have prompt, uninterrupted access to finance from diverse sources, late payment would be very rare. It would present only a manageable risk to businesses.”
The report looks at how suppliers and buyers can improve the situation, by working more closely together, and by investing in customer/client relationships.
On the supplier side, they can protect themselves through careful due diligence, and by understanding the administration of their operations.
On the buyer’s side, they can protect themselves by signing up to prompt payment codes and sticking to them. In the interests of their own long term sustainability, they need to monitor the financial health of their supply chains and be vigilant.
Mr McGuire added: “Despite its importance, ending late payment has proved to be an elusive goal for governments across the world. What the the UK government needs to recognise is that late payment is essentially a demand for credit and start tackling the problem as such.
"They need to be fully focused on building a financial infrastructure that boosts trade credit through support of alternative finance and the free availability of credit information.
“This approach has the potential to be far more effective than the measures currently proposed around improving the legal framework for late payment disputes and ensures that government policy makes a positive difference far earlier.
“When late payment becomes a chronic problem, supply chains are beyond repair and customer relationships fail. Opening the doors to trade credit for the UK’s businesses, including Northern Ireland, is a solution that could put a stop to late payment before it has even started.”
