Posted: Fri 1st Sep 2023
One in four invoices received by large businesses are settled outside of payment terms and there has been virtually no improvement in the average time it takes to pay suppliers since 2018, according to analysis of government data by the Chartered Institute of Procurement & Supply (CIPS).
Under the Reporting on Payment Practices and Performance Regulations, large companies are required to submit details on their UK payments twice a year. CIPS looked at the latest data and found that 26% of invoices were paid late, the same as in 2022.
Although the figure has improved since 2018 when 31% of invoices were paid late, the average time taken for large firms to pay suppliers has only fallen by one day over the past five years. In 2023, large businesses took an average of 36 days to pay.
Many large businesses also seem to be ignoring their legal responsibilities to report data. Research released earlier this year by Good Business Pays found that of the approximately 11,000 organisations covered by the rules, only around 5,000 currently report the data.
The latest payment data comes ahead of the findings of the government's consultation on the effectiveness of the reporting rules which are expected to be published after the Parliament recess. Enterprise Nation contributed to the consultation.
One suggestion being considered is whether big businesses should have to report on the total value of their late payments, as well as the number of payments.
The aim is to reveal the financial impact poor payment practices are having on the UK economy and address concerns that the data is being distorted by businesses paying smaller invoices quickly whilst delaying larger ones.
Nick Welby, CIPS CEO, said:
"The unprecedented disruption businesses and consumers around the world have witnessed in the last four years has taught us that when supply chains break down, the economy and consumers suffer.
"For supply chains to work well, everyone needs to be paid on time and within agreed terms. Failure to do so can result in a domino effect, rippling through the supply chain with each subsequent link at risk.
"Suppliers should not be expected to bankroll their customers and a culture of ‘buy now, pay at some point’ is not acceptable. Paying suppliers promptly not only strengthens relationships but can lower costs and, crucially, build resilience across supply chains – something that has been severely tested in recent years."
Terry Corby, CEO of Good Business Pays, added:
"There has never been a more pressing time to address the damaging issue of late payments within the UK economy. Failing large businesses often spread their financial weakness to their entire supply chain by delaying payments in an effort to hold onto cash. With a potential recession on the horizon, businesses must be extra vigilant about declining payment performance.
"It is clear from the falling volume of submissions that some businesses are ignoring the regulations entirely and are failing to input their data. Not only is this against the law, but it is symbolic of a culture of disregard towards the impact of late payments and the rules in place to tackle it.
"The approach of relying on businesses to police themselves on this issue is clearly failing and more robust penalties are needed to force large businesses to properly engage."
The government's payment and cash flow review is also measuring the effectiveness of the Small Business Commissioner, a role created to help small businesses deal with unpaid invoices from big customers.
An estiminated total of £23.4bn in outstanding invoices is currently owed to UK businesses.
Advice for dealing with late payment
Podcast: How to deal with late payment