UK businesses are getting better at paying their bills, according to credit reference agency Experian. Its Late Payment Index shows that on average, companies were settling invoices 2.06 days earlier in September than in the previous month.
The index, which measures payment beyond agreed terms, reveals that small businesses (26 to 50 staff) showed the biggest year-on-year improvement, paying 18.52 days late. The largest companies (with more than 500 employees) made the month-on-month improvement (down 13.5 per cent to 24.63 days). But they're a long way off from the 15.44 days of September 2008.
It's no surprise to see that the property sector took the longest, paying 30.01 days beyond terms. On the up side, the agriculture, forestry and fishing businessses were the least tardy in payment, with a delay of 10.96 days. The IT sector saw the biggest improvement in both the year-on-year (down 43.7 per cent) and month-on-month (down 25.2 per cent) comparisons.
'There are a number of factors contributing to the vast improvement in payment performance among businesses,' says Experian. It cites the the Prompt Payer Register as one such factor. This Register, founded in 2003, aims to gather together businesses that are proud to advertise that they pay their bills on time.
Payment performance is a 'key indicator of a business’s cash flow' says Experian, adding that 'a history of slow payment will have a detrimental effect on their credit score and ultimately the amount of credit available to them'.
At the same time, small businesses can use payment performance information to assess risk and decide whether or not to supply goods or services to a company. Given the difficulty of accessing finance, SMEs may be wiser to focus on their cash flow and deal with companies with a better payment reputation.
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