The ISME Credit Watch Survey for the fourth quarter of 2015, was launched today (21st December 2015), showing that average payment waiting days have increased by one day over the quarter. Small businesses are now waiting an average of 56 days for payment. The Association warned that these payment delays created significant cash flow issues for SMEs and called on Government to prioritise efforts to change the Irish payment culture.
ISME Chief Executive Mark Fielding commented, “SMEs have every right to expect to be paid promptly for the products and services that they deliver but, all too often, this simply isn’t the case. They are forced to wait an average of almost two months for invoices to be paid and they must somehow maintain a steady cash flow despite these payment backlogs. Big businesses think nothing of demanding long payment terms, despite the clear burden that this places on the smaller business. This is blatant abuse of a dominant position and is condoned by the current administration”.
“These large businesses could afford to pay on time but they take advantage of their dominance to reap the benefits of delayed supplier payments. The next time consumers hear big businesses brag about their CSR efforts they should ask them how long they take to pay SMEs.”
“In April this year, the Department of Jobs, Enterprise and Innovation, in collaboration with external stakeholders, launched a Prompt Payment Code and Portal. It was launched without promotion and has largely gone unnoticed by big businesses to date. ISME is promoting the Code and the benefits of this initiative, which could help to change Irish payment culture. Government must also do their part to help. A team effort is needed to address this very serious issue.”
The main findings from 956 respondents in the third week of December are:
• Average payment period for SMEs in the fourth quarter of 2015 has increased to 56 days.
• 15% of SMEs are experiencing delays of 3 months or more, down from 16% in Q2.
• 4% waiting 120 days and over, similar to Q3.
• Late interest is charged by 1% of SMEs, while only 4% of medium sized businesses charge it.
• Dublin businesses wait longest, at 61 days, with the rest of Leinster waiting 52 days.
• Manufacturing are waiting an average of 62 days, while Wholesale wait 48.
• 79% of SMEs favour a statutory 30 day payments regime, with no opt out, an increase from 71% in Q3.
ISME continues to propose the introduction of a statutory 30 day payments regime for all business trading within Ireland with other Irish based enterprises, without exception. This could be introduced on a phased basis over 3 years, as follows:
Year 1 60 days.
Year 2 45 days.
Year 3 30 days.
“While the prompt payment code and portal are worthwhile initiatives, they are still not a definitive solution to the problem. Such a solution could be delivered, in the form of legislation to mandate 30 day payment terms, if the Government only had the courage to demand fair play of the large MNCs.”
The Association called on the Government to;
• Amend the legislation and begin the process of reducing the statutory payment days to 30.
• Insist that state agencies, especially the HSE, adhere to the 15 day rule.
• Publicise, promote and champion the Fair Payment Code for all businesses.
• Insist on adherence to Fair Payment Code as criterion for granting state contracts.
• Insist on publication of payment data by state agencies as instructed.
• Government should ‘name and shame’ those who pay SME businesses late.
• Improve the efficiency of the courts in relation to trade credit.
• Provide alternative dispute resolution and mediation options to SMEs.
• Promote the adoption of e-invoicing.
“Thus far we have seen little more than lip service from businesses with regard to improving payment times. It seems inevitable that this problem will continue to plague SMEs in the coming years, as there appears to be no political will to instigate change. The first duty of any new administration should be to introduce a fair 30 day credit regime across all trading entities in Ireland”, concluded Fielding.