The credit reference agency Graydon UK, working in conjunction with the Forum of Private Business, surveyed 500 small firms across the UK.

The responses showed that 16% had almost been put out of business as a result of late payment. A total of 51% cited it as a problem, and 23% said it was a serious problem.

The researchers say that the “domino effect” meant that the late payment cycle was passed on to other firms further down the supply chain. The survey showed that 56% of firms that weren’t paid on time had subsequently been unable to pay their own suppliers on time.

A total of 45% of firms said that late payment had eroded their profits, and 23% admitted it had reduced their ability to innovate and invest in growth.

In spite of all these problems, few of the firms surveyed wer
e taking formal action to ensure payment.

A spokesman for Graydon UK said: “The current economic climate makes it more important than ever that companies clearly understand the risks and opportunities associated with their operations. This includes identifying the cash flow and other risks triggered by the late payment of trade invoices by customers.

“Companies cannot achieve sustainable growth if they aren’t paid on time consistently. This is why having a formal credit management process based on reliable, accurate customer payment behaviour information is essential for businesses who want to transact with confidence and fulfil their sustainable growth potential.”

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