Payment performance gap narrows

The 2012 Late Payment Index from Experian has revealed that UK businesses paid their bills more than a day earlier in 2012, compared to 2011. During 2012, firms paid their overdue invoices on average 24.66 days after agreed terms, compared to an average of 25.70 days during 2011.

The year drew to a close with the average late payment figures during Q4 falling from 25.97 days beyond terms in Q4 2011 to 25.63 days.

The largest improvements during 2012 were led by businesses with more than 100 employees, paying on average 2.25 days faster than in 2011. This played a key role in helping the gap between the payment performance of the UK’s smallest businesses and the largest companies narrow further in 2012. Micro businesses with one to five employees paid on average 20.95 days late in 2012, whilst large firms with over 100 employees paid on average 27.15 days late – a gap of 6.2 days compared to 7.9 days in 2011.

Max Firth, UK Managing Director for Experian’s Business Information Services division, says the gap between payment performance of the largest and the smallest businesses narrowing is predominately as a result of more rapid payment behaviour amongst larger businesses:

“The overall improvement in payment performance is encouraging, though the average payment speed remains slower than the level seen prior to the 2011 peak.

“Understanding how quickly clients are paying their invoices provides firms with an early warning sign of potential issues, enabling businesses to plan accordingly for any debt or work with firms that are showing signs of struggling, to manage any potential loss.”

Four out of the UK’s five largest industries – business services, building/construction, property/hotel and leisure saw improvements in their payment performance during 2012, with only IT experiencing a slight increase of 0.74 days.

Looking across all sectors, many of those that saw the most significant improvements were those that were traditionally some of the latest payers, such as property, postal/telecoms, leisure/hotels and food retailing. They all saw their average payment speeds falling by more than two days.