'Large firms exploiting captive SMEs'
NOT only are large companies exploiting smaller ones by not paying their bills on time, but they have taken to demanding money to settle them at all, the Federation of Small Businesses complains. It is a bizarre twist of laws that entitle companies to add
NOT only are large companies exploiting smaller ones by not paying their bills on time, but they have taken to demanding money to settle them at all, the Federation of Small Businesses complains.
It is a bizarre twist of laws that entitle companies to add interest to late-paid invoices, said FSB Huntingdonshire chairman Malcolm Lyons this week.
But it puts small firms in a dilemma: do they risk losing a large corporate client by insisting on prompt settlement, or do they take it on the chin.
"You have to be careful," he told The Hunts Post. "Small businesses are frightened to invoke their right to charge interest for fear of losing business. But it's a form of bullying. It shows big business's inefficiency if they can't manage their cashflow properly."
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The FSB has unearthed evidence that big organisations are unashamedly making smaller firms wait over 100 days before getting paid, often changing terms and conditions with little notice.
In one example, the high street chain Alliance Boots wrote to its suppliers in June to inform them that, as of April 2008, bills would be paid up to 75 days from the end of the month of invoice with a 2.5 per cent settlement fee.
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John Wright, FSB national chairman, said: "Big companies appear to be aware that small businesses are afraid of taking them on over payment terms and are abusing their power as a result.
"Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous.
"At a time when small businesses are finding it difficult to deal with a slowing economy and rising costs, it is shocking that large companies think it is acceptable to use them as an unofficial source of credit."
Mr Lyons added: "I do not want small businesses to lose business, but small businesses must stand up for themselves. Make sure your contracts are adhered to, and do not negotiate longer payment terms without compensation," he advised. "I know that it is easy to make comments, but we all want to stay in business.
"I want all businesses to prosper, but we must not let the inefficiencies of big businesses cause the efficient small businesses to go out of business.