Updated: Wednesday, 7th October, 2009 4:35pm

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Late payments are 'destroying' small business sector

The Irish Small & Medium Enterprises Association (ISME) has lambasted the Government's "do nothing" stance on the issue of prompt payments for small and medium firms from big business and State bodies.

The delay in payment has increased dramatically to 76 days on average, according to ISME, accusing the Government of ignoring the plight of SMEs. The very survival of many SMEs is at issue and many face bankruptcy because of the delays, exacerbated by a continuing lack of bank credit, it alleged.

The recent Autumn ISME Credit Watch Survey received in excess of 500 responses from the small and medium sector, a response rate of 26 per cent.

The main issues are:

• Actual average payment period in Ireland for SMEs is longest on record at 76 days.

• Only 16 per cent of firms being paid within 30 days.

• 47 per cent are experiencing delays of 90 days or more.

• 17 per cent waiting over 120 days, an increase from 10 per cent in the spring survey.

• Leinster and Munster are the slowest at 77 days.

• Construction firms are waiting a massive 98 days.

Commenting on the survey results, ISME chief executive Mark Fielding said: "Despite an increase in SME credit management training and practice, more than half of small businesses (56 per cent) are waiting longer for payment, with the average payment period being 76 days; among the highest in Europe. Some 47 per cent of companies now have to wait over 90 days to be paid. The situation is continuously deteriorating as the delays have increased from 60 days in autumn of 2007 to the current excessive 76 days, and banks are, in the main, refusing to extend credit limits to assist cashflow."

He added: "The fact that so many companies are being forced to wait longer for payment shows that the seven-year-old legislation is useless and should be amended, as small businesses continue to be squeezed by their larger counterparts."

The association called on the Government to introduce a mandatory payment period, whereby all companies, regardless of size, would be guaranteed payment within 30 days from the end of month of invoice or delivery, as was initially intended by the legislation, with no exceptions. This could be introduced over a three-year period.

It also wants a mechanism along the lines of the existing small claims court structure to settle business to business disputes as they arise and to prevent further abuse of the small business sector.

"The Government's inactivity is disgraceful and will hasten the demise of many small enterprises and throw more workers on the dole. The abuse of dominance by State bodies and large business must be stopped, and the ISME recommendations would allow all businesses to predict their cashflow, introduce a level playing field for all credit transactions and bring down the cost of doing business," concluded Mr Fielding.