Companies 'still paying late' despite government reforms

More than five years after the government brought in legislation to curb late payment, the gap between the average payment period of companies in the UK when the legislation was introduced and now has expanded even further, according to a leading information solutions company.

Experian, which monitors payment performance as part of its business information reports, said that in November 1998 companies took 57.5 days to pay their bills – now they take 59.5 days. The average payment period for large companies has increased from 72.1 days in 1998 to 78.3 days in November 2003 – an increase of 6.2 days.

Compared to six months previously the average payment period of companies in the UK has increased by more than one day to 59.5 days:

Only two industries are unchanged, with small companies in 24 industries taking longer – the beers, wines and spirits industry taking on average more than 10 days more.

The worst culprits amongst large companies are gas companies, which have increased their payment times by 14 days.

Overall, irrespective of size of company, just six industries have reduced their payment times in the last six months, with 23 industries showing an increase. The slowest industry in paying its suppliers, taking all sizes of company into account, is the oils industry, which takes an average of 69.7 days, an increase of 1.5 days on six months previously.

Phil Cotter, Managing Director of Experian’s Business Information division, said that whilst there were signs of improvement amongst certain sectors, the culture of late payment in the UK "shows no signs of abating".

"Despite this, many UK businesses are still failing to take basic steps to minimise the risk of late payments, not least the threat of insolvency,” he said.

“Deteriorating payment patterns are a good indicator of potential cash flow problems and companies are well advised to check the creditworthiness and payment record of customers to protect against the effects of late payment.

"In fact, over half of all bad debts arise from longstanding rather than new customers. By making regular checks on their customers, companies can ensure they are alerted to any cash flow problems.”

Companies which adopt the latest techniques in credit risk management, combined with a commercial approach to payment collection during the sales cycle, can significantly improve their cash flow and profit by reducing late payment and minimising bad debt, Experian said.

(gmcg)