SMEs waiting 60 days to be paid, down from 62 in previous quarter.
Less than 3% of SMEs charge interest on late payments.
Two thirds of SMEs have credit terms dictated to them by larger business.
79% of SMEs favour a mandatory 30 day payments regime with no opt-out.
Voluntary code on prompt payments ignored by big business.
ISME, the Irish Small and Medium Enterprises Association, has welcomed the continued improvement in commercial payments in the first quarter of 2014, at the launch of the SME Credit Watch Survey, today (3rd April). However the Association highlighted the continued failure of the Prompt Payments legislation as only 3% of SMEs feel they can charge interest on late payments, threatened by larger business who will stop dealing with them.
Speaking at the survey launch, ISME Chief Executive Mark Fielding stated; “we welcome the reduction in late payments, however 60 days is still too long and the fact that less than 3% of businesses can charge interest on overdue payments, clearly shows the failure of the legislation in the small business’s unequal struggle with larger customers”.
“Allowing SMEs to charge 8% on late payments is a sick joke, as small businesses are already being told that they will lose business if they even mention interest. This abuse of market power and corresponding fear of harming commercial relationships is not being addressed by the Government,” continued Fielding. “Even the attempt by the Department of Jobs, Enterprise & Innovation to improve matters through a “Fair Pay Charter” has run into the sand due to lack of support from big business lobby group IBEC, as the abuse of the dominant position by big business continues unabated.”
The main findings from 1050 respondents in the final week of March are:
Average payment period for SMEs in the first quarter of 2014 has improved from 62 to 60 days. This is the shortest period recorded since autumn ‘07.
25% are experiencing delays of 3 months or more, an improvement on the 30% in Q4 ’13.
5% waiting over 120 days, similar to Q4 ‘13.
A net 14% of businesses are waiting longer (Q4, 2013 15%).
Late interest is charged by only 2% of micro and small businesses, while 9% of medium sized businesses charge it.
Dublin and Munster businesses wait longest, at 62 days, while Connaught is best at 52.
Distribution businesses wait on average 66 while wholesale is shortest at 56 days.
79% of SMEs favour a statutory 30 day payments regime, with no opt out.
The ISME recommendations for a 30 day mandatory payment would allow all businesses to predict their cash flow, introduce a level playing field for all credit transactions, reduce reliance on bank finance and bring down the cost of doing business. This initiative would stop the abuse of dominance by large business and state agencies and allow indigenous small enterprises to survive and maintain jobs.
The Association called on the Minister for Jobs, Enterprise and Innovation to;
Introduce, publicise and champion a Fair Payment Charter for all businesses.
Insist on adherence to Fair Payment Charter as criterion for granting state contracts.
Begin the process of reducing the statutory payment days to 30.
Insist that state agencies, especially the HSE, adhere to the 15 day rule.
Insist on publication of payment data by state agencies as instructed.
Government should ‘name and shame’ those who pay SME businesses late.
In conclusion Fielding called on the Minister Bruton to exert pressure on the multinationals and large businesses, through the IDA and Enterprise Ireland to pay promptly and at a minimum to sign up to the charter.