Warning delay in payment puts firms in danger

Columnist and Senior Features Writer

Monday 11 March 2013

SCOTTISH small businesses are increasingly going to the wall because of the failure of major companies to pay their bills on time, it has been claimed.

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SUSAN SWARBRICK

The Federation of Small Businesses in Scotland made the claim as a construction firm went into administration, putting more than 60 jobs at risk.

A J Clark Group, based in Kilmarnock, East Ayrshire, which had held contracts with the likes of Asda, Tesco, Rolls-Royce and Diageo, partly laid the blame for its demise on some of its customers failing to pay on time during the property downturn.

It did not name the firms involved.In 2009 about one in four small businesses reported having to wait beyond the terms they had agreed to get paid for work, but by 2012 this had more than doubled to 55%.Colin Borland, a spokesman for the Federation of Small Businesses in Scotland, said the firm's plight highlighted the issue of customers pushing back the deadlines for payments as they strive to save money in the downturn.He said it had been an issue for some time, but had become noticeably worse due to the credit crunch and economic downturn.He said: "There are laws in place that allow you to charge penalty interest, sue or enforce contractual obligations."However, we know that, in the real world, suing your customers is a last resort. "He warned that the situation had to change or firms would be put at risk.He said: "There has to be a change of culture, particularly among large PLCs who, to be honest, regard their small suppliers as a free overdraft when it suits them. "It's utterly disgraceful. It may be a cliche but you can make a loss plenty times in a business, but only run out of money once. "That's what is killing a number of small businesses."He warned 60 families would now be left fearing for their own futures after the company's demise. A J Clark directly employs 62 people from its Kilmarnock base as well as additional sub-contractors and agency staff. In the year ending April 30, 2011, it had a turnover of £19.5 million.Alan Brown of PCW has been appointed receiver of the A J Clark civil engineering business and as administrator of its sister house-building company ATD Developments.A statement released by the firm said the company had been squeezed by slow-paying customers and a "decrease in the profitability of its building contracts."It added that the directors had done their best to ensure the company had a future, but there was little sign of the situation improving.It stated: "The directors are acutely sensitive of the effect this decision will have on its employees, their families and others who rely upon the company. "We would like to pay tribute to the loyal service given to the company by all of its employees and to the support it has enjoyed from many of its suppliers and from the Royal Bank of Scotland over the years."

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Warning delay in payment puts firms in danger

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