The ISME Credit Watch Survey for the third quarter of 2015, was launched today (5th October), showing a reduction in payment days to 55 days, the lowest since the introduction of the Prompt Payments legislation in 2002. The Association welcomed this reduction but warned that late payments are continuing to cause liquidity issues for some SMEs.
ISME Chief Executive Mark Fielding commented, "The positive turn in the economy is being seen in these 'payment days'. However, we need to instill a cultural change which sees late payments become a thing of the past and not just dependent on the ups and downs of the economy. Big businesses must streamline their payment processes to avoid delays and must not be allowed to insist on lengthy payment timelines. SMEs often face detrimental liquidity problems due to late payments which is a frustrating and unfair position for them. Agreed credit terms must be adhered to."
"This issue is vitally important to Irish SMEs but continues to be ignored by Government agencies. The voluntary 'Fair Pay Code' and Prompt Payment Portal introduced this year have not been properly promoted by Government and are currently having little or no effect on the culture of late payments. However, Government will still count the launch of these as a successful action in the Action Plan for Jobs."
The main findings from 1,060 respondents in the last week of September are:
Average payment period for SMEs in the third quarter of 2015 has improved to 55 days.
16% of SMEs are experiencing delays of 3 months or more, down from 21% in Q2.
4% waiting 120 days and over.
Late interest is charged by 2% of SMEs, while only 4% of medium sized businesses charge it.
Dublin businesses wait longest, at 59 days, with the rest of Leinster waiting 53 days.
Manufacturing and Services are waiting an average of 58 days, while Wholesale wait 50.
71% of SMEs favour a statutory 30 day payments regime, with no opt out, a drop from 77% in Q2.
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.
"Paying promptly is essentially a CSR issue but many large companies who promote their CSR policies ignore their responsibilities in this area. We need to make it a key element of ethical business behaviour and ensure that Big Business are not allowed to abuse their dominance through delayed payments. Companies who publicise their CSR efforts should also outline their payment practices to weed out the transgressors."
The Association called on the Minister for Jobs, Enterprise and Innovation 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.
"We welcome the reduction in the payment days as a result of the improvement in the economy, generally. However, late payments in Ireland is a product of industry hierarchies and market power, condoned by government for decades, leading to SMEs suffering. For big business it is the cheapest form of credit at zero cost, gained by the threat of withdrawal of future business. This abuse of a dominant position can only be rectified by government intervention, through the ISME proposals above", concluded Fielding.