The Department of Business and Trade’s new survey into payment practices, supplier relationships and government interventions revealed that on average, 7 per cent of supplier invoices were not paid within the agreed timeframe.Â
The goods sector had a higher rate of late payments (10 per cent) compared to the services sector (5 per cent). The average proportion of supplier invoices paid late was also higher in the pharmaceutical sector than the insurance sector (7 per cent versus 4 per cent).
Micro businesses were more likely to report that less than 10 per cent of supplier invoices were paid late (94 per cent), while medium and large businesses were less likely to report this (73 per cent and 63 per cent respectively). Medium-sized businesses reported 75 per cent or more supplier invoices were paid late.
Administrative error blamed for late paymentsÂ
Administrative errors or failings were blamed for 36 per cent of late payments, followed by disputed invoices (31 per cent) and technical issues (23 per cent). Cash flow problems due to late-paying customers accounted for a fifth of late payments, with micro businesses more vulnerable (32 per cent). Micro businesses were also more likely to report paying invoices late due to cash flow issues.
Payment methods vary depending on business sizeÂ
Bank transfers remain the primary payment method for suppliers, used by 97 per cent of businesses. More than a third (34 per cent) used credit card payments and 23 per cent used debit card payments.
However, micro businesses were far less likely to use bank transfers (91 per cent) compared to the overall average, favouring debit card payments (38 per cent) and cash (7 per cent). Medium-sized businesses preferred credit card (44 per cent), while services businesses were more likely to pay via debit card (32 per cent).
The survey also found that businesses with dedicated employees to handle payments were more likely to pay via bank transfer (99 per cent versus 90 per cent among those without). Those without paid by debit card (36 per cent versus 15 per cent among those with dedicated staff).
Shorter payment terms enforced for micro businessesÂ
Contractual payment terms varied across business size and sector. Some 71 per cent of businesses reported that their suppliers offered 30-day terms.
Micro businesses tended to have shorter payment terms, with 10 per cent required to pay within seven days of invoicing compared to just four per cent of businesses overall. Businesses in the construction sector were generally required to pay 60 days after the invoice date (14 per cent versus 6 per cent among businesses overall).
The survey revealed that 72 per cent of businesses typically paid within the contractual terms. However, 10 per cent admitted to taking longer than agreed, while 18 per cent paid early. Micro businesses and services companies were more likely to pay early (both at 27 per cent), while small businesses tended to delay payments (19 per cent). Businesses in the services sector paid earlier than companies in the goods industries (27 per cent versus 9 per cent). Pharmaceutical businesses took longer than insurance companies to pay within the contractual period (12 per cent versus 0 per cent).
Regulatory awareness greater for larger than small business
The survey also examined awareness and understanding of the Reporting on Payment Practices and Performance Regulations 2017. Overall, nearly a third of all businesses surveyed reported being aware of these regulations (31 per cent), with 65 per cent unaware and 4 per cent unsure. Large businesses were more likely than micro businesses to be aware of the regulations (42 per cent versus 25 per cent).
Among those aware of the regulations, 71 per cent reported a good understanding of their purpose, and 62 per cent understood the types of organisations to which the regulations apply. Around half reported a good understanding of the reporting requirements; 53 per cent understood what information needs to be reported and 49 per cent understood how often information needs to be reported.
Some businesses felt no additional measures were necessary. Others advocated for the introduction of maximum payment terms from two weeks to 90 days. There were also calls for harsher penalties for late payments and more effective enforcement mechanisms.
The survey highlighted that timely payment of invoices was critical to the survival of SMEs.
Some businesses supported mandatory reporting by large businesses on their payment policies and practices under the reporting regulations. This would encourage large businesses to pay invoices within the agreed payment terms and help supplier cash flows.
Others questioned the efficacy of the reporting regulations and that information about payment practices and performance had little impact on their business because they could not avoid clients that perform badly.
