Late payment improving amongst businesses

UK firms are waiting less time to receive payment from their debtors, according to data from Experian.

Businesses paid their bills an average of two days earlier between April and June 2012 compared to the same quarter the previous year.

It also fell from 24.59 days from the first quarter of 2012 and is the third consecutive quarter of improving payment performance and cash flow between businesses.

However, firms are still paying their overdue invoices some 23.38 days after agreed terms, down from 25.23 days in the same period in 2011.

Larger firms, those with between 101 and 500 employees, saw the largest improvement, with invoices being paid nearly two and a half days faster than the previous year.

The longest late payments have historically occurred from larger businesses, although the difference in late payments between the smallest and larger firms has gradually been reducing since the final quarter of 2011. The gap has narrowed from nearly 20 days during 2009 to under 12 days during 2012, mainly led from businesses at the larger end of the scale.

Max Firth, managing director for Experian's business information services, said: "Much of this improvement has been led by the UK's largest businesses. There is, however, only so much improvement that can take place among these firms. The very nature of the way large businesses are structured - hundreds of suppliers, multi-sites, multi-departments, stringent processes - makes it impossible for them to pay as fast as their smaller more flexible counterparts."

The Forum of Private Business (FPB) this month launched a campaign calling for the UK's largest and most successful businesses to agree on paying their smaller suppliers on time, as laid out in their original contracts and without changing the terms in retrospect.

Launching the campaign, business secretary Chuka Umunna said that smaller companies were waiting too long for payments and were at risk of going under because of late payments from large companies, organisations and the public sector.

Max Firth added: "It is vital that smaller firms think about their collection strategies, and take on board some of the strategies employed by their larger counterparts to help ensure they get paid on time."

It advised that smaller firms monitor the payment performance in order to watch for the early signs of deterioration and establish those firms who continue with late payment before it was 'too late.'

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