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The average time taken by UK-based firms to pay their bills has shortened by two days in the last 12 months, to an average of 15 days late against agreed payment terms.
 
According to a new report by commercial information provider, Dun & Bradstreet (D&B), the average bill payment time peaked at 17 days in 2011 and is currently on the decrease.
 
Encouragingly, the figures indicate that most businesses have adapted adequately to operating in today’s sluggish economic climate and are now managing their cash flow more confidently post-recession.
 
The data also highlights the potential impact of the recently amended EU Payments Directive that delivers a framework in law for suppliers to minimise risk and protect cash flow.
 
The legislation is designed to make it simpler and more efficient for businesses to pursue outstanding payments. Debtors are forced to incur interest and pay an administration fee for failure to pay for goods and services within a 60-day window for business and a 30-day window for public authorities.
 
Although the legislation adequately protects certain businesses, the updated Directive does present new challenges for firms already struggling to manage their cash flow and make payments on time, due to the potential risk of further interest liability.
 
In comparison with payment times in other European countries, the UK’s 15-day payment times are similar to that of France, Spain and Italy. However, Germany, perhaps unsurprisingly, leads the way with the shortest average payment period of the nations with a six-day average payment window.
 
Corinne Saunders, president of D&B Europe & Worldwide Network, said: "Payment trends offer valuable insight into the trading performance of a business, and changes are one of the earliest signals of financial difficulty or potential failure.
 
"Whilst we’re unlikely to see an increase in litigation as a result of the updated Payments Directive, it should encourage businesses to take a fresh look at their payment behaviour and that of their customers.
 
"It will also put pressure on large businesses in sectors where extended payment terms have been used as a means to protect margins, often putting smaller companies under increasing pressure."

Date published 18 Apr 2013 | Last updated 18 Apr 2013

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