One-third of small businesses employed by Government are paid late

A recent report from the National Audit Office (NAO) has found that a third of small and medium-sized enterprises (SMEs) employed by the Government for public sector work receive payment beyond their initial due date.

In addition, the NAO also revealed that four governmental departments – BIS, MoD and the home and cabinet offices – had failed to record the date on which a number of paper invoices were received.

Meanwhile the government’s payment performance was also skewed in their favour due to a high volume of low-value electronic transactions involving only a few large suppliers.

The NAO admitted there was also little evidence to suggest the government’s commitment to paying 80 per cent of undisputed invoices within five working days is giving small firms a helping hand.

The vast majority of public bodies are still taking more than a month to pay and there is a genuine feeling that the government’s policy simply boosts the working capital of main contractors as opposed to benefitting firms further down the supply chain.

The report indicated that supplier could benefit to the tune of £88m-a-year in terms of reductions in interests costs should government bodies pay invoices within five working days.

Amyas Morse, comptroller and auditor general, NAO, has voiced his concerns about the prompt payment performance and its impact on private sector payment practices.

“These were overstated by the four departments we looked at. It remains to be seen whether the changes proposed in the Small Business, Enterprise and Employment Bill and secondary legislation will be enough to bring about improvements, not just in public sector payment practices but the private sector as well,” said Morse.

A spokesperson for the government said: “The report recognises that we are making progress, but there is more to do.
“That is why from this month we are insisting on prompt payment within 30 days all the way down the public sector supply chain.”

Last updated: 9th January 2015