Good and bad news on the late payment front. On the one hand, Asda is improving its small supplier payment terms, but on the other, late payment threatens to cripple export trade. Is a solution any nearer?

The news from Asda is certainly encouraging, both in terms of the direct impact for the supermarket chain’s smaller suppliers and the indirect effect it may have in inspiring similar change at other big corporations. According to the Walmart-owned grocer, smaller suppliers that do up to £250,000 of business with it a year will operate on 14-day payment terms.

Tellingly, the move comes a few months after the government introduced new legislation that forces big companies to report their payment practices. The timing would suggest that the reform is having a positive impact. However, the problem is far from being solved.

According to new research from Crossflow Payments, late payment remains endemic and a serious barrier to growth. The study revealed that almost a quarter of the small businesses questioned regularly receive payment for invoices late, with over half stating that payment arrived ten days or more after the deadline. In addition, almost 40% of companies admitted not setting payment terms at all.

This delay and its impact on cashflow is having a critical knock-on effect, not least on the ability of SMEs to invest in development, which in a Brexit-framed market includes export capability. In short, late payment is putting a vital revenue stream beyond many small businesses and is smothering key economic growth.

So, how can SMEs unshackle themselves from the constraints of late payment? The new legislation offers hope and is perhaps the most heartening development in a long time, but it remains to be seen if it is the panacea that small business owners dearly want it to be.

As ever, small businesses are best served by being proactive and taking their own steps to safeguard their cashflow. One step is to add invoice finance to their financial planning strategy. These alternative finance services offer not only accessibility, affordability and flexibility but, on approved invoices, the guarantee of payment.

Late payment has long behind a puzzle that no one has been able to solve. As the SME funding landscape is redrawn, there is the chance that invoice finance and its like may help finally shift more power to small business owners.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.