The ISME Credit Watch Survey for summer 2011, released today, shows clearly that smaller enterprises are being placed under severe pressure by deliberately delayed payments from big business and state agencies. Despite continuous warnings and corroborating quarterly statistics from the Association, the Government refuses to tackle this issue as businesses and jobs go to the wall as a result of totally inadequate legislation.
As in previous payment surveys, the summer 2011 report demonstrates that SMEs are particularly hard hit by late payments. They are more vulnerable to variations in cash flow, they often rely on a limited number of customers, and they are frequently suppliers to large accountancy-led businesses and state agencies who are delaying payments to boost their own cash balances. The proof of this is that the smaller the enterprise the longer the wait.
Commenting on the deteriorating situation, ISME Chief Executive, Mark Fielding stated “When smaller businesses are not being paid on time, they cannot in turn pay their suppliers and the vicious circle ends with the smallest and most vulnerable being forced to close down. This abuse of a dominant position by big business and state agencies has been allowed to continue as the law, in this case, does the exact opposite to what was intended, in allowing powerful customers to dictate unreasonable credit terms to their smaller suppliers”.
The main findings from in excess of 600 respondents in the week ending 1st July are:
· Actual average payment period in Ireland for SMEs is 73 days.
· 44% are experiencing delays of 3 months or more.
· 14% waiting over 120 days.
· A net 39% of businesses waiting longer, compared with 38% in the previous quarter.
· Both big business and state agencies continue to increase the credit taken.
· Small business waits 77 days on average while medium firms are paid in 67 days.
The latest figures aptly demonstrate the effect that late payments are having on SMEs, in that the main victims are small businesses caught in a cycle of non payment. While the main government departments have improved their payments, the real offenders are the state agencies and big business where delays have increased dramatically since the first quarter of this year.
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