Small firms are waiting for months to get paid, says FSB

Some of the best-known companies in Britain are causing the closure of 4,000 small businesses because of the late payment of invoices, according to research published yesterday by the Federation of Small Businesses (FSB).

The federation accuses groups such as the catering giant Compass, the online book seller Amazon and the brewer Carlsberg of extended payment terms to up to four months, or even charging small businesses for prompt payments in some cases.

The FSB says that the one in three small companies in the UK are now waiting longer to be paid by debtors since the onset of the credit crunch, a problem that directly led to closure of 4,000 firms last year.

"Poor payment practices in both the public and private sectors can drastically affect cash flow for small firms at a time when business owners are doing their best to hold on to precious funds," said John Wright, national chairman of the FSB.

Colin Harper, a director of Al-Vac UK Ltd, said that he has terminated his agreement with Carlsberg to supply and service vacuum lifting machines after he received a letter from Kevin Murray, Carlsberg's director of procurement, saying that the brewer would wait for up to 125 days before settling invoices. Previously, Carlsberg settled invoices within 60 days of the end of the month in which the bill arrived.

"Carlsberg said the change was due to unprecedented economic hardship, but it is astonishing. A company of Carlsberg's size should be reducing payment terms to help smaller suppliers in difficult times."

A spokesman for Carlsberg said the company has made the change, "to get a better balance between payments from our customers to us, and from us to our suppliers".

Carlsberg is not alone in attracting the FSB's ire. The organisation accuses the couriers DHL of charging suppliers 3 per cent for paying invoices on time, while Amazon is charged with insisting on a 2 per cent settlement fee for invoices it pays within 90 days. DHL and Amazon declined to comment.