CALLS for all businesses to adopt a culture of prompt payment have won support in Dorset.
The Confederation of British Industry says the average business is owed £31,000 and the national late payment debt stands art more than £30bn.
It says companies are being held back during the recovery because they are owed so much money.
Its concerns were echoed by Ian Girling chief executive of Dorset Chamber of Commerce and Industry.
He said: “Payment terms are a major issue for businesses.
“There can be a culture of large businesses taking a long time to pay small businesses, placing tremendous strain on the cash flow of small businesses.
“People often use late payment as a way of extending their borrowing.
“Where working capital remains tight for businesses, payment remains an issue.
“We’ve got businesses trying to get paid as quickly as possible and we’ve got businesses trying not to pay as quickly as possible.
“The shortage of bank lending is not helping the situation.”
He said some large companies would frequently offer payment terms of 90-120 days on a ‘take it or leave it’ basis. And he said there were some viable businesses that had gone under because of the problem.
“They’re profitable businesses that have gone bust because of cash flow, in particular where the banks have been unwilling to lend.
“On paper they’re profitable; they’ve just run out of cash,” he said.
The CBI says, responding to a government consultation, all companies should publish their supplier payment policies. It says there should be a ‘target’ maximum payment term with some flexibility for more complex contracts.
Part of the prompt payment code should include an ’upper tier’ for companies who want to sign up to even higher standards.
Matthew Fell, CBI director for competitive markets, said: “Most companies agree and stick to fair payment terms but we need to create a culture of prompt payment in all businesses.
“It’s unacceptable that many firms are being held back from growing and creating jobs because they are owed thousands of pounds.”
He added: “Supply chains should be collaborative, so we must avoid a heavy-handed approach to regulating payment, which could actually drive custom overseas away from UK firms.”