The problem of late payments is still dogging businesses and contractor accountants, according to the latest data from Experian.

UK firms still took an average of 25 days too long to settle their debts in the first quarter of this year, the same as the comparable period in 2010.

The harsh winter weather could be blamed for payment delays at the end of 2010, but figures did not improve despite the better weather in the first quarter of 2011.

Large organisations, with more than 500 staff, are still the worst offenders settling their debts 34 days late. The smallest firms are seen as the best payers but even they didn’t settle until bills became 20 days overdue.

The postal and telecoms sector are the slowest payers, not settling up until bills are an average of 46 days overdue whilst the oil sector and agriculture, forestry and fishing industries came out best with an average of less than 15 days late.

Bibby Financial Services says that this concern over late payment has encouraged more companies and limited company contractors to take out bad debt protection. The invoice finance specialist’s research shows that 37% of businesses say customers are taking longer to settle up than they did a year ago.

The Asset Based Finance Association reports that the number of companies protecting against bad debt increased by 23% in Q4 last year compared to the final quarter of 2009.

Despite this, there has been a 15% increase in the number of firms experiencing significant or critical financial distress. In the first quarter of this year 186,554 UK firms were flagged in the Begbies Traynor Red Flag Report, compared to 161,601 in the comparable quarter last year.

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Companies are now taking slightly less time to settle their invoices than they did in quarter 3 last year, according to Experian.

Experian’s research shows that, on average, companies settled their bills 22.61 days late last quarter, instead of the 23.17 days they took in the comparable period last year.

Micro businesses, those with just 1 or 2 employees, settled up the fastest in Q3 taking an average 19.43 days. Companies with 500 or more employees are still the slowest payers, but they registered the best improvement level. In the third quarter of 2009, the largest firms were taking 39.33 days to pay up and this has now reduced by just over 4 days to 35.31 days.

Sector wise, the largest improvement was in Spirits, Wines and Tobaccos where the average settlement period reduced by 3.23 days to 15.95. Overall, the fastest paying sector is still Agriculture, Forestry and Fishing and is the only industry to settle less than 10 days late. The slowest payers are to be found in the Postal and Telecoms sector with an average settlement time of 39.13 days beyond agreed terms.

On a regional basis the South West showed the best improvement whilst Yorkshire, the North West and Scotland all recorded worse late payment times than in the corresponding period last year.

Meanwhile, large companies that try to persuade suppliers and contractors to reduce their costs are coming under fire. Serco, the outsourcing giant, demanded a 2.5% cash rebate from almost 200 of its suppliers. They did however retract the demand after receiving much criticism from business groups and politicians.

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Contractor accountants and small businesses could benefit from a new invoicing directive from the Council of the European Union.

The new system, which will simplify VAT invoicing processes, must be in place by 2013. At that time, tax authorities must accept and handle electronic invoices in the same way as the current paper documentation.

Electronic invoicing experts at Deloitte welcomed the announcement saying that computerised financial systems already store invoice documentation securely and so it makes sense to acknowledge the new technology is secure when it comes to tax audits. However, they would prefer to see the directive implemented before 2013 if possible.

The UK and the Netherlands already have a system whereby companies can make arrangements to make sure all the necessary procedures have been followed in order to produce a correct tax return.

The directive also contains anti-fraud measures and deadlines for the issuance of invoices which are aimed at speeding up the exchange of data on intra-EU supplies of goods and services.

The European Union will also need to provide new standardised instructions regarding the archiving of accounting documents. Currently, UK companies and limited company contractors must retain e-documents for at least 6 years but other member states have different retention requirements.

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71% of small businesses have received at least one late payment over the past year according to a new study by NatWest.

They have discovered that the cumulative value of unpaid invoices currently stands at £62.87 billion of which £15.7 billion is for debts over 120 days old.

The NatWest study also showed that whilst 45% of SMEs have taken steps to protect their businesses only 11% have hired a credit controller to help chase debtors.

Although the problem has alleviated slightly since the end of the recession, fundamental difficulties are still apparent.

Steve Hughes, an economist at the BCC is urging businesses to run “clear and efficient” invoicing practices to minimise the risk of late payments. He stressed the need for companies to have agreed terms of payments with businesses that they supply.

The government had taken steps to address the problem and earlier this year pledged to pay public sector bills quicker. They have also enhanced and prompted the Prompt Payment Code.

Most of the leading contractor accountants already have web-based accounts receivable systems and processes set-up for their clients, to help keep track of outstanding invoices.

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