Supplier relations worsen

Business relations with suppliers at five year low as payment terms lengthen

New study warns of too many SMEs falling through the ‘payment gap’

UK businesses are reporting a five year low in relations with suppliers, despite signsof economic recovery, according to a new study by funding specialist Bibby Financial Services (BFS).

At the same time, the number of small and medium-sized enterprises that said customers were making prompt payments has slumped since 2009, putting a significant number of businesses in danger of falling through the ‘payment gap’.

BFS – the UK’s largest independent invoice finance provider - has polled 500 business owners each quarter since 2009 on a range of issues including level of orders, investment plans and supplier payment terms.

New analysis of this data reveals just eight per cent of businesses reported good relationships with suppliers in the final months of 2013, compared to 50 per cent of firms in Q4 2009.

In addition, just nine per cent said debtors were making prompt payments at the end of 2013, compared to one in five (19 per cent) in 2009.

David Postings, UK CEO at Bibby Financial Services, said the data charted a five year decline in two key areas for SME firms; ensuring good terms with suppliers and being paid on time to help support a stable cashflow.

He said: “We would hope that both these trends are reversed this year as they represent two key pressure points in terms of cashflow for any business, but particularly SMEs.

“It’s critical that businesses have strong relationships in place with suppliers as they directly impact product and service quality, delivery and the overall competitiveness of a business.”








Findings follow a call from the Government’s Small Business Ambassador, Karren Brady, for legislation of larger companies who delay payment of smaller suppliers.

Postings continued: “In terms of the business supply chain, prompt payment is vital – particularly for businesses that don’t have huge reserves of working capital and those finding it hard to cover the costs of production.

“Business owners who find themselves in this situation need to be aware that there are ways to address the payment gap. It shouldn’t be the case in 2014 that small businesses are failing due to cashflow problems - particularly as there are a wide range of finance options available and providers willing to lend.

“Businesses with robust credit control processes and working capital are undoubtedly better placed to take on more orders and to invest in their business. Invoice finance offers businesses both; providing much more flexibility than a loan or overdraft”, Postings added.

Posted by on 15 April 2014.