PROMPT-PAYMENT RULES HAVE failed and small businesses are now waiting longer to get money from customers than before the laws were brought in.
The Irish Small and Medium Enterprises Association (ISME) wants a mandatory 30-day payment window to be brought in across the country to make sure businesses have the cash flow they need.
Its latest credit-watch survey found Irish SMEs were waiting an average of 62 days to get paid – up from 52 days more than a decade ago before prompt-payment laws were first introduced.
ISME chief executive Mark Fielding said the vast majority of small- and medium-sized businesses backed a mandatory 30-day payment window for all accounts and he called on the government to change its useless laws.
“Government ministers must stop this charade of being ‘SME focused’ while they allow ineffectual prompt-payments legislation to continue to strangle small business,” he said.
The facts are that since the legislation was introduced SMEs are waiting longer to be paid, they are afraid to charge interest on late payments and the abuse of dominant trading positions is ‘flourishing’, despite assertions to the contrary”.
Interest only after 60 days
The latest late-payment rules came into effect in March last year and specified that all invoices should be paid in a maximum of 60 days, or 30 days in the case of public authorities.
Businesses which weren’t paid in time would automatically be entitled to the European Central Bank’s standard interest rate plus 8% on overdue accounts.
But ISME’s survey found a quarter of SMEs were still waiting over 3 months to get paid and 5% had to hold out for more than 120 days.
Only 2% of small businesses and 4% of medium-sized ones were charging interest on late payments.
Fielding said all SMEs relied heavily on cash flow to pay their own bills and buy stock, and those responsible for slow payment should be put on a government “name and shame” list.
“With the deterioration in late payments across the board, cash flow in the entire sector is drying up and this, coupled with the lack of available and affordable credit from the banks, is placing many small businesses at risk, with the resulting closures and job losses,” he said.
A previous survey found nearly half of all Irish companies were forced to offload staff because late payments were putting pressure on their cash flows.
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