Most Irish SMEs afraid to hit bigger firms with interest on late payments

As many as eight-out-of-10 small businesses in Ireland are not charging interest on late payments by larger companies as they are scared of losing their business, according to the latest credit watch survey from the Irish Small and Medium Enterprises Association (ISME).
 
The ISME found that most SMEs were waiting on average more than two months (63 days) for payment between July and September – reduced from 66 days in the previous quarter.
 
However, the survey confirmed 80 per cent of firms are choosing not to charge interest on late payments as they are worried bigger companies will opt to take their custom elsewhere.
 
Mark Fielding, chief executive of the ISME, believes the Prompt Payment Legislation is failing some businesses.
 
"The results of this latest ISME Credit Watch Survey are encouraging," he said.
 
"However, the fact that 80 per cent of SMEs are afraid to charge interest on late payments, as is their right, demonstrates the failure of the legislation.
 
"Two-thirds have to accept the credit terms dictated by big business customers."
 
Other key findings from the survey included:
 

• Average payment period reduced from 66 to 63 days – the shortest period recorded since 2008.
• Some 30 per cent are experiencing delays of three months or more.
• Just four per cent are waiting more than 120 days, an improvement in the June survey figures of 10 per cent.
• Ulster and Munster businesses wait longest, at 67 days, while Connacht is best at 61 days.

 
Although overall credit levels have improved, ISME has continued its calls for a strict statutory 30-day payment regime for all businesses in Ireland to be phased in over three years.
 
The body also demanded that stage agencies – including the HSE – adhere to a 15-day rule on payments, whilst calling on the Government to “name and shame” companies who pay small businesses late.

Date published 8 Oct 2013 | Last updated 8 Oct 2013