John Mason, SNP MP for Glasgow East, said the Home Office paid only half its suppliers promptly, leading to potential cash flow problems.

A Home Office spokesman said it was committed to paying bills within 10 days and was working to improve its performance.

Parliamentary figures revealed that in March 2009 50% of bills submitted to the Home Office were paid within 10 working days, rising from 18% in November 2008. Other UK government departments reported that 82% to 88% of bills were paid on time.

Mr Mason said: “There is no excuse for these extraordinary failures by the UK government to meet its own 10-day target and pay its bills on time – particularly in these troubled economic times when a speedy cash flow is important to many businesses.

“This isn’t simply about keeping the businesses afloat but keeping people in jobs.”

FSB spokesman Colin Borland said: “The Scottish Government has done well to ensure that so many of its own invoices have been paid under the 10-day target however this story is not replicated across the entire Scottish public sector.

“Recently, Scottish parliamentary questions have revealed that the Scottish Government is not collecting information about how quickly the rest of the public sector is paying its invoices.”

A Home Office spokesman said: “We are committed to seeing our small business providers paid within the new 10-day time limit.

“Our on-time payment performance has increased significantly and we expect this will keep improving.”
For advice on how to avoid late-payment problems, see our article Control your credit and beat the crunch

Almost £26billion is owed to small businesses across the UK in outstanding payments.

The problem is leading to a quarter of all business failures.

The FSB is concerned Chancellor Alistair Darling failed to address late payment in his Budget.

It is urging him to give Companies House more resources and legislative backing to publicly name, shame and fine companies that renege on their payment terms.

Until that happens the FSB will contact larger organisations on hearing complaints about payment times and will name and shame companies which are revealed to be paying late or unfairly.

Andy Willox, the Federation of Small Businesses’ Scottish policy convener, said: “With around 120 businesses closing a day across the UK, effective action must be taken to show larger businesses that small firms are not an external source of credit.

“The FSB will tackle this serious problem by issuing ASBOs which will name and shame those companies that are taking small businesses for a ride.”

For advice on tackling late-payments, see our guide Control your credit and beat the crunch.

The news comes from Bacs Payment Schemes Limited (Bacs), the organisation behind Direct Debit and Bacs Direct Credit.

The research showes that while the national average of outstanding payments was worryingly high in 2008 – £38,000, up £8,000 on 2007 figures – the biggest increase comes to those in the Midlands, with the average SME claiming an average overdue invoice of £69,000.

Manufacturing has seen the highest incidence of late payments, with almost two thirds (65%) of SMEs in this sector experiencing a delay in invoices being paid, compared with 53% of those in the service industry.

UK SMEs are waiting an average of 41.5 days beyond agreed payment terms for invoices to be settled, with almost a quarter (24%) saying that ‘cashflow problems’ are given as the excuse.

Michael Chambers, managing director of Bacs, said: “This research demonstrates the pain being felt by many small and medium sized British businesses during these challenging economic times, and late payments could well be a major factor in the success or failure of these companies in the year ahead – SMEs are currently disappearing at a rate of 86 every day(1).

“Action must be taken to address this crushing payment issue; but businesses also have to take responsibility for helping themselves where they can. For instance, while the Government has brought in a system of paying public sector invoices within ten days(2), surprisingly, three quarters ( 66%) of British SMEs haven’t replicated that and still offer lengthier payment terms. Encouraging payment straight into bank accounts by Bacs Direct Credit could also help to shorten delays and avoid ‘cheque in the post’ excuses.”

For more information about late payments and how to tackle them head on, please go to www.paymedirect.co.uk where Bacs has developed a series of hints and tips for encouraging prompt payment.