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Late payments cause pain for small firms

Date Added: 18/10/2013  

There's little more frustrating as a small business owner than not being paid on time.

Even if your company is being run perfectly well and is turning a solid profit, not being able to get money in at the right time can easily cause cash flow problems that can derail a firm.

When clients fail to pay up on time this adds extra pressure throughout a business and can even in extreme cases lead to it being unable to pay members of staff - threatening the future of the firm and the livelihoods of its workers.

With small businesses needing to make sure their employee costs, tax bills and suppliers are paid on time every month, it only takes a couple of late payments to cause issues.

Paying late is therefore likely to be passed on throughout the supply chain, meaning the smaller companies bear the brunt of the problems as their financial situation is often more unstable.

Larger businesses have even been known to deliberately withhold paying their suppliers and clients in order to improve their own finances - without considering the impact this is going to have on a wide range of other companies.

Prime minister David Cameron has now indicated he will take action on the late payments issue, threatening to fine businesses that regularly fail to pay up on time.

Small organisations might welcome this step, but will rightly question whether or not this is the right way to go about addressing this complex problem.

Speaking after YouGov research showed the vast majority (85 per cent) of small firms have experienced late payment over the last two years, Mr Cameron stated that he is clear more needs to be done to tackle late payments.

He said: "It's not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium-sized businesses."

For more information about how to avoid late payments, contact 4R Business Recovery on 0800 9020 123.

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