Rural small businesses are being hard hit by an increase in late payments because of the Covid-19 crisis.
A report by the Federation of Small Businesses (FSB) shows that 62% of business surveyed in the UK have experienced either an increase in late payments and/or had payments frozen completely as a result of Covid-19.
Rob Basini, Development Manager at FSB Wales, said the issue was particularly acute in rural communities. He said: “Rural businesses tend to use more local supply chains. If one business has significant issues with even just one payment it has a knock-on effect across that rural area. One late payment, at this time when so many businesses are facing such financial pressure, can mean the different between survival and closure.”
FSB’s report, Late Again: How The Coronavirus Pandemic Is Impacting Payment Terms For Small Firms, describes how many customers needing to hold on to cash assets during the pandemic have chosen to do so by not paying due invoices.
The FSB has campaigned for action to tackle poor payment practice, describing it as “one of the most serious impediments to small business growth and survival”.
Its data has also shown that very few companies are changing, or communicating any change in terms of payment or freezing of payments, to small businesses in advance. Only one in ten small businesses supplying B2B or B2PS (business to public sector) are informed of such changes.
Late payments can also exacerbate existing issues faced by businesses in rural areas, said Rob. He said: “Digital infrastructure is an ongoing issue for many small businesses across rural areas. This is a time when they need to be using digital technology more than ever, for instance to sell online. But often they haven’t got the money to invest or to upskill in this key area.
“Late payments also impact a business’ ability to innovate. Innovation takes cashflow, as well as mental and creative space – none of which flows under the pressure of dealing with late payments.”
The FSB is calling on small and big business, along with government, to work together to deal with the issue of late payments.
One of its recommendations is that the Small Business Commissioner – which provides a free service and covers the whole of the UK – be given the discretion to be able to investigate a business for late payment or poor payment practice based on insight from key stakeholders such as Select Committees and business lobby groups, rather than reports from small businesses themselves.
Currently small businesses can use the service on a risk free and anonymous basis to raise complaints about poor payment practice which will be investigated, and recommendations will be made about how to resolve the issue.