ALMOST a third of invoices issued by small businesses in the south east are not paid within the recommended time period of 30 days.

According to new research undertaken by Lloyds Bank Commercial Banking in partnership with the UK Small Business Commissioner 32 percent of invoices are paid late in the region and the average period between issue and receipt of payment is 38 days.

Small Business Commissioner Paul Uppal is to recommend a traffic light warning system to give small firms a signal about which large businesses are late payers.

The public data research analysed official payment reporting returns based on the annual reports of large businesses. Legislation imposed in April 2017 required all large businesses to publish their payment practices. The research carried out sampled data from 7,010 companies and revealed that:

• 65 per cent of large businesses have an average bill payment time of more than 30 days

• More than a fifth (22 per cent) report an average bill payment time of 50 days and above.

• The average time taken to pay is 37 days

• London companies are the most prompt - paying bills in 34 days followed by those in the South West, paying after 35 days.

• Yorkshire and the Humberside firms have the worst record with payments taking 43 days, followed by companies in Northern Ireland and East Midlands with an average payment time of 41 days.

• Only 14 per cent of companies analysed, reported payment terms of 19 days or under.

Mr Uppal argues that firms which take longer than 30 days to pay are, in effect, using their supply chain to finance their businesses.

he believes that a simple warning system will alert companies to the potential of longer payment terms.

Mr Uppa said: “The effect of late payment on small firms in the South East can be devastating. It impedes business growth, but also has an impact on the lives and mental health of those running small firms.”

“There has been a requirement to report this information for nearly two years, and some businesses have now made two reports. The challenge now is to use the information to help small firms make sound decisions based on transparent information before deciding which larger businesses they should trade with.

“A traffic light system would be a simple and effective way of demonstrating which larger firms have structured their supply chain in such a way that it is more than an exchange of good or services but also resembles part of their financing model.”

He added: “Our initial findings indicate that almost two thirds of payments are likely to be owed to smaller firms at any time. This is money that could be used to grow smaller businesses and generate tangible economic activity. Instead it is stuck on large firms’ business ledgers doing nothing.”

Ed Thurman, managing director of Global Transaction Banking at Lloyds Bank Commercial Banking, said: "For some businesses two weeks can be critical in the financial well-being of a smaller businesses. Businesses could consider utilising invoice financing products to mitigate these challenges.”