During recent years many companies focussed
on the element of supplier’s credit as they sought to improve their own bottom
lines.
By virtue of their purchasing power large
corporations such as the supermarkets are able to squeeze their suppliers.
It is the SME’s who are feeling the pressure
most acutely. The average small business is owed £31,000 in overdue payments,
amounting to over £30 billion across the UK economy.
The UK has late-payment laws that give small
businesses the right to charge interest, but many avoid doing so for fear of
upsetting customers.
The EU issued a directive in 2013 which aimed
to enforce similar measures across the union, with public bodies given 30 days
to pay and businesses 60.
Cash flow is a vital element for any business
and timely payments are crucial for small businesses trying to grow.
Over the past couple of years many companies
have lengthened payment terms seeing the suppliers as a soft target.
With suppliers consistently facing a declining
return it should come as no surprise when they conclude that the game is not
worth the candle.
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