Despite legislation only 3% of SMEs charge interest on late payments.
75% have credit terms dictated to them by larger business.
85% of SMEs favour a mandatory 30 day payments regime with no opt-out.
Voluntary code of conduct will be ignored by big business.
ISME, Friday 3rd April 2015.
The ISME Credit Watch Survey for the first quarter of 2015, launched today (3rd April), shows that the credit being taken from SMEs has increased from 60 to 62 days on average. The Association called for a change in the ineffective Prompt Payments legislation which has failed to benefit small and medium businesses and has, in fact, made the situation worse by allowing big business contract out of the legislation.
Speaking at the survey launch, ISME Chief Executive Mark Fielding stated, “How many more surveys will we have to conduct in order to get the Government to move on this. Irish SMEs are being abused by their big business customers and recent ECB SAFE figures also confirm that big business in Ireland extract more credit from trade debt than any other EU country. The recent attempt by Diageo to increase payment days to 90 is but another example of sharp practice. The 30 days mentioned in the legislation is now a sick joke, while our government allow ineffectual prompt payments legislation to continue to strangle small business”.
The main findings from 932 respondents in the last week of March are:
Average payment period for SMEs in the first quarter of 2015 has deteriorated to 62 days.
23% of SMEs are experiencing delays of 3 months or more.
Over 3% are waiting more than 120 days.
Late interest is charged by less than 2% of small businesses, while only 3% of medium sized businesses charge it.
Munster businesses continue to wait longest, at 64 days, while Connaught is best at 50.
Distribution businesses wait on average 64 while Wholesale is shortest at 53 days.
85% of SMEs favour a statutory 30 day payments regime, with no opt out.
ISME proposes 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.
“Big business continue to abuse their small suppliers and even the ‘soft’ option of a voluntary ‘Fair Pay Code’, being launched today, is in danger of being ignored and stymied by big business and Government agencies, who delay legitimate payments to SMEs, placing them in jeopardy.”
The Association called on the Minister for Jobs, Enterprise and Innovation to;
Amend the useless 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.
“The ISME recommendations 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.”
“We will of course give the new Prompt Payment Code some time to be adopted, however, if big business and government agencies do not ‘play ball’ the onus will be back on Government to finally change the legislation in line with ISME proposals,” concluded Fielding.