Legislation to sweep away a culture of late payment in business has been a failure, according to research that shows it has triggered no improvement in the time it takes companies to pay their bills. Experian, the business information group, found that companies waited an average of 58 days, including agreed credit periods, to settle invoices. This compares with 57.5 days in 1998, when the government brought in laws to cover late payment. The study found the delay in the UK was greater than for any other large European Union country, averaging 27 days beyond agreed payment terms. This compares with 10 days for France, 17 for Germany and 21 for Italy.

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In Britain, it is typically small companies, whose intermittent cash flows make them vulnerable to collapse, who are paid latest, with some reporting that up to six months’ turnover is tied up in debts owed to them. According to Bank of Scotland, half of small businesses have to wait up to a year for at least one debt to be settled, with a quarter waiting for up to two years. The problem is fostered by company structures that discourage contact between buyers and finance departments eager to win a cash flow advantage by paying suppliers late.

Discussion points
1 Why might the government’s disclosure regulation have failed to persuade companies to pay their suppliers more promptly?
2 What problems does the article identify within structures of companies?