We all know that healthy IT contractor accounts rely on prompt clients paying on time. However it isn’t often the case, and late payments are beginning to garner attention, with promises of help from the government and the beginnings of the Small Business Commissioner.
However research carried out by the Tungsten Corporation has shown that small to medium businesses in the UK are owed an average of £40,000 by late payers.
With the amount of SMEs in the country totalling 5.2 million, this works out at around £212 billion in late, unpaid invoices.
The study looked at over 1000 businesses with less than 250 employees. It was found that out of all the sectors who took part, it was IT businesses who were the most severely affected by late payments. Most often, these IT businesses would consist of self-employed, one man band IT contractors. Their status as sole operator obviously leaves them in a more vulnerable position than most.
The research found that 32 per cent of IT businesses had been affected by late payments to the point where they faced shutting down. Across the board, that amount dropped down to 25 per cent. Other, bigger businesses can act more robustly with a small amount of capital, which is not often possible for IT contractors.
The government have accused larger clients using delay tactics in order to put off the payment of invoices as “supply chain bullying”.
Those found guilty of late payments were largely big companies with 22 per cent of the total. A further 11 per cent was owed by medium companies, and eight per cent by the public sector. The remaining third said there was no obvious main offender, but their difficulties remained.
So can the Small Business Commissioner really make a difference to this problem? There are still more details to be announced on what the SBC will be able to do, but what is known is that the Commissioner will be able to dispense advice on disputes and process complaints from unpaid contractors. It has also been confirmed that they also have the ability to name and shame those businesses who have been found guilty of late payments.
For something that has been the difference between a successful month or a dangerous financial shortfall for the individual’s contractor accounts, the SBC is being eagerly awaited by the IT contracting community.