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Bigger firms imposing ‘grossly unfair’ terms on payments, says IoD

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Bigger firms imposing ‘grossly unfair’ terms on payments, says IoD

The Institute of Directors have been very vocal in their criticism of large corporations lengthy settlement terms and the dire impact it has on SME organisations.

Their recent survey found 52pc of members have faced issues of delays in the past year.

Poor organisation at the customer’s end was blamed by 31pc of companies which faced difficulties, as they ­complained about “excessively ­bureaucratic payments systems”. ­Another 23pc said bigger firms in the supply chain are imposing “grossly ­unfair” terms on their payments.

A further 9pc said the customer changed the terms of payment after ­being invoiced, while 5pc of delays were caused by a dispute between the firm and its customer.

Philip Hammond, the Chancellor weighed in when he said “the aim is to work out how we can eliminate the continuing scourge of late payments”.

“It is deeply disturbing that so many businesses have to struggle to claim the money they are owed. Chasing late payments can have a particularly ­damaging effect on small companies, sapping resources and hurting their productivity,” said the IoD’s Edwin Morgan.

“Our members will try only to work with businesses that pay on time, but it’s not always possible. At the heart of the issue is a power imbalance. Smaller companies are often made to jump through unnecessary hoops by larger customers, but don’t want to risk souring the relationship by taking any formal action.”

The survey of 787 companies found that 34pc would support a mandatory maximum payment term while One-fifth said increased penalties for late payments would be the best ­solution.

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