Automotive industry improves poor late payment record

As the number of days UK businesses take to pay their bills reaches its highest point on record, the automotive industry reveals a more positive picture.

The average number of days it takes for all motor traders to pay their bills has finally come into line with the national average, according to Experian, the global information solutions company.

The latest report has revealed that on average, UK businesses take 61.1 days to pay their bills, while motor traders, who had previously always exceeded the national average significantly, are now taking the same length of time.

Kirk Fletcher, the Managing Director of Experian’s Automotive division, said: “This is the first time that the average number of days taken to pay bills by motor traders has come into line with the national average. Overall, the time it has taken for dealers to pay their bills has been improving since November 2004, when it had reached its highest point (64.4 days – 3.6 days higher than the national average).

“In 1998, motor traders were amongst the three slowest industries when it came to paying their bills, but the sector has managed to maintain a fairly steady level compared to other industries.”

In addition, the latest late payment report, which also classifies companies further by size, has revealed that the time it takes for larger motor dealers to pay their bills has fallen to its lowest point since 1998, when legislation to combat late payment was introduced. Larger dealers are now taking an average of 76 days to pay their bills – 5.5 days less than the national picture for large companies and seven days less than they took to pay their bills six months ago. In previous years, larger motor dealers were among the slowest of the larger companies in all UK industries when it came to late payment.

Small and medium sized motor dealers take less time to pay their invoices (59 and 60 days respectively) than the average number of days taken by small and medium sized companies in all industries (60.2 and 61.3 days). However, both small and medium sized dealers saw an increase of one day compared to six months ago.

Kirk said: “Companies that take their time to pay their invoices may be viewed as having financial problems by companies awaiting payment and in this environment they are more cautious about trading with companies that have a poor payment performance record. This can affect motor dealers’ business-to-business transactions, as most suppliers are aware that late payment plays a major role in the failure of some companies, so may be reluctant to deal with them. Regardless of whether or not dealers are operating in a struggling market, having a good payment record is a positive business attribute and will only benefit them in the future.”

Experian’s findings are based on the payment patterns of more than 435,000 companies in the UK.