New data released by Experian reveals that businesses in the UK settled their overdue invoices on average 1 day faster than in the previous tax year. Overall North West based companies and food retailing businesses posted the most improved payment performance figures.
Nationally the average days past terms (DPT) companies took to pay invoices fell by 0.98 days to 23.86 during the year from 5th April 2014 to 4th April 2015.
As usual small businesses were the most prompt payers and the largest companies the slowest payers. Companies with 1 to 2 employees paid their invoices in 20.57 DPT. Companies with 3 to 5 employees posted the best improvement, settling their invoices 1.3 days quicker at 21.33 DPT. Sadly, the largest corporations, those with more than 500 employees or more, once again took the most time to pay their bills at 34.17 DPT, although this was down by 0.98 on the previous tax year and on a par with average improvement nationally.
Good news for your business?
It’s encouraging that businesses and companies of every size improved their payment performance in the last financial year. Yet even the fastest payers still on average pay way beyond terms and more needs to be done to tackle the culture of late payment in all UK business sectors. Cash flow is king, and extremely important to the health of any business, in particular medium and small sized businesses, late payment affects profitability and stunts growth, while causing a chain reaction that affects suppliers.
While it is positive news that invoices are being paid faster, payment a day earlier, when the average payment is 23.86 late will make very little difference to most businesses. Directors and business owners cannot afford to be complacent, they must monitor closely accounts and customers payment behaviour to identify at an early stage any potential problems. Many businesses also fail to make proper use of late payment legislation which has been designed to improve cash flow across the whole economy. The businesses that have implemented and make full use of the legislation have seen marked improvement in cash flow and reduced administration in chasing late paying accounts.
The National DPT figures
Across the Regions
Businesses based in North West England improved their payment performance by the greatest margins, paying overdue invoices 3.77 days earlier at 30.43 DBT. However, the North West remained the region that took the most time to settle its bills. Northern Ireland was the fastest region to pay its invoices with businesses paying on average 15.92 days past terms. There was also a decrease in the time taken to pay invoices by companies in Scotland, down by 1.63 days, reducing the average DBT to 22.03. The North East was the only region to see an increase the days it took to pay invoices, up by 0.42 days on average.
The Regional DPT figures
Industry payment performance
Food retailing companies improved their payment performance by the greatest margins in the year to April 2015 by paying invoices 3.14 days faster, reducing the average DBT in the industry from 30.58 in 2013/2014 to 27.43 in 20145/2015.
In the 2013/2014 tax year, the fishing, forestry and agriculture industry was top of the figures, on average only going 9.97 days beyond terms. In contrast the telecommunications and postal industry was bottom of the pile, taking 44.43 DBT to settle invoices.
Industry DPT figures
What you can do to reduce the problems associated with late payment
- Status check: Is the business you are about to supply who they say they are? Forty percent of the companies registered at Companies House never go on to trade. You should always verify a new customer’s details including the trading address before fulfilling any orders.
- Credit check: Performing a credit check will allow you to make measured decision on the level of credit to extend, by analysing trading history and credit status.
- Maintenance checks: Trading conditions and financial positions can change quickly, last month’s prompt payer could be faced with financial difficulty this month affecting your cash flow. Monitor and update your customers credit histories on a regular basis to identify problems before they happen.