Small Talk: Small businesses struggle to get paid – and too often the culprits are big businesses and councils

One in four companies is spending more than 10 hours a week chasing overdue payments

What has government inaction on the issue of late payments cost small businesses? Thanks to new research from the payments service Bacs, we now know the answer to that question: £9.4bn.

Bacs says that small and medium-sized enterprises are today owed a staggering £39.4bn in overdue bills compared with £30bn when it conducted the same research a year ago. Last year’s data prompted a government pledge of intervention to give small businesses chasing unpaid invoices greater support, but this has yet to materialise. And while we’ve been waiting, the problem has got almost 30 per cent worse.

The figures are nothing short of a scandal. Six in 10 small businesses are owed late payments and the average small business is currently owed £38,186 in overdue bills, Bacs says. One in four of these companies warns that if the amount owed was to rise above £50,000, they would be forced into bankruptcy. One in four companies is spending more than 10 hours a week chasing these payments.

It is not as if we are talking about payments that are marginally overdue – three quarters of the smaller companies in the research said that payment of their bills was typically at least a month late.

Possibly the most depressing statistic of all in the Bacs research is the figure for how much large companies are owed in late payments – just £6.7bn – less than a quarter of the debt burden their smaller rivals are facing. The implication of those numbers is stark: smaller companies are being bullied by creditors who know they can get away with paying weeks or months late because of the limited power of the firms they owe money.

So what is to be done about the late payments problem? Well, the Government has already published draft legislation that will eventually force companies to publish more information about their payment terms – the theory is that larger businesses might be shamed into speeding up. It has also promised to strengthen the Prompt Payments Code, a voluntary code of best practice which by any measure has been an abject failure.

However, this action plan is far from ambitious – particularly for a government that has vowed to battle for small business and to encourage entrepreneurship. Why not make the code statutory, as well as strengthening it with financial penalties? Why not do more to enforce the EU’s late payments directive?

Moreover, the Government has a hugely powerful tool at its disposal, in the form of its status as the UK’s biggest procurer of goods and services. There is nothing to stop it barring companies from tendering for public sector contracts if they refuse to sign up to the Prompt Payments Code, or if they fall foul of its requirements. Too often, though, the late payments that small companies are owed turn out to be public sector debt. Local authorities are particularly probe to a failure to pay on time. Now that the recovery has been established, the figures should be heading back downwards. Instead, recalcitrant bill payers are behaving more badly than ever.

US software listing is a coup for Aim

The Alternative Investment Market has no shortage of foreign listings, but the successful IPO on Friday of ClearStar represented something of a coup for London’s junior stock exchange: it was the first flotation on Aim this year of a US business. That the company chose Aim for its listing, rather than one of the many US exchanges that cater for smaller businesses, represents a success for the market.

Valued at £20m, ClearStar is a software specialist that works with companies recruiting staff, enabling them to access background check information much more quickly. Existing clients include Toyota, IBM and FedEx and the firm had sales last year of £4.6m, up by more than 50 per cent on 2012.

The Aim listing has seen ClearStar attract a number of prominent British fund managers to its shareholder base, including Standard Life, Artemis and River & Mercantile, as well as the small-cap specialist Hargreave Hale.

NZ miner decides London is the place

The New Zealand resources business Chatham Rock Phosphate is to list its shares on Aim after abandoning plans for a listing on the Toronto stock exchange. The company, which already has a listing on New Zealand’s junior NZX, will publish full details of its Aim admission plans later this month.

The company said that while the wide range of fertiliser and mining businesses listed on Aim’s Canadian rival had initially attracted it to Toronto, depressed share price valuations there had changed its mind. It described the cost of listing in London instead as “significant” but said it expected to be able to access capital not available elsewhere.

Chatham Rock has permits to mine phosphate in several sites in New Zealand and is applying for further licenses. The material is a key ingredient in many fertilisers, but is currently almost entirely imported into the country.

Small Business Person of the Week: Patrick Van der Vorst, Founder, Value My Stuff

“We launched the business in 2009 with the help of investment from two of the Dragon’s Den panellists – the pitch was based on the 13 years I had spent running the furniture department at Sotheby’s, where I’d come to the conclusion that many people felt intimidated by the big auction houses but didn’t know where else to get an independent valuation of their goods.

“That’s where we felt there was a gap in the market for Value My Stuff; it’s an online service – people simply have to upload a picture of what they want valuing, plus any history of the item they have and details of how they acquired it. Then one of our team of 62 experts, of whom 58 used to work at Sotheby’s or Christie’s, supplies a valuation. For that service, we charge a £7.50 fee, irrespective of how much we think the item is worth.

“The service has been phenomenally popular – we have 400,000 people registered on the site and we’ve valued more than 500,000 items.

“Stripping out the most expensive items, which skew the figures, the average item was worth £356, but we’ve had some amazing finds, including a Monet painting valued at up to £3m.

“In March we launched Auction My Stuff. It’s an eBay type platform, but where everything for sale has been vetted by us. Sales have grown quickly – last year, our turnover reached £1.25m and we’re on target to hit £2.5m in 2014.”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003