Late payments rising in property and business services sectors

21 August 2008

UK businesses now settle bills nearly four weeks beyond agreed terms says Experian but this rises to 31 days in the business services sector and 38 days in the property sector.

One year on from the start of the credit crunch, new analysis released today by Experian, the global information services company, shows that UK businesses are now settling their bills almost four weeks after their agreed payment dates. With businesses already using extended payment terms as a form of short term funding, this trend means that some smaller businesses could be waiting as long as five months for payment from the point of invoice for goods and services supplied months earlier.

At the end of July 2007, the time it took for businesses to settle their bills after agreed terms stood at 16 days. However, by the end of July 2008, this Days Beyond Terms (DBT)* figure had increased by nine days to 25 days. Experian’s DBT data is derived from its payment performance information, gained from a database that tracks 20 million transactions per month - the equivalent of £12 billion of transactions each month - to indicate good and poor payment trends. This payment performance information plays a pivotal role in Experian risk management products such as The Risk Report and Ledger360.

However, across the national DBT figure there are marked differences between some key industry sectors. The Property sector has seen its DBT figure increase by 18 days over the year and businesses in this sector now show an average DBT figure of 38 days. Meanwhile, businesses in the energy sector, traditionally a relatively slow paying sector, are now paying their bills on average 37 days beyond agreed terms – up from 24 days in July 2007. The Business Services sector has seen its DBT figure increase by 13 days over a 12-month period to stand at 31 days.

The Food, Drink and Tobacco sector is another big climber. Businesses in this sector are now settling bills on average 25 days beyond terms, up from 15 days a year ago. At the other end of the scale, Agriculture, traditionally a prompt payer is on average taking 15 days to settle bills following their due date, an increase of seven days from July 2007.

Tony Pullen, Managing Director of Experian’s Business Information division, said: “As our payment performance data shows, businesses are not only taking longer to settle bills after agreed terms, but they are also extending those terms so that where they may have previously paid 30 days from invoice, they are now pushing this out to 60 or even 90 days. The problem for smaller suppliers is exacerbated because they are often under pressure to settle their own bills quickly to secure goods and supplies essential to their business.”