To read the full version of this content please select one of the options below:

Size matters: the late payment problem

Salima Y. Paul (Bristol Business School, University of the West of England, Bristol, UK)
Rebecca Boden (Roehampton Business School, Roehampton University, London, UK)

Journal of Small Business and Enterprise Development

ISSN: 1462-6004

Article publication date: 25 October 2011

Abstract

Purpose

The supply of trade credit by small‐ to medium‐sized enterprises (SMEs) is the product of both customer demand and the possibility of strategic advantage, but is subject to risk. In the current financial climate the demand for trade credit may be heightened, leading to further increased risk. This paper seeks to evaluate current risk mitigation measures in the UK and considers how these might be improved.

Design/methodology/approach

The supply of and demand for trade credit and the inherent risks are explained by reference to the literature. Then, using both the academic and grey literature and data from a large‐scale questionnaire, the paper highlights the limitations of both regulatory and management approaches to mitigate the risks in the context of UK SMEs. Finally, the paper considers the prospects for improved management.

Findings

Trade credit may be a product of market demand or a desire to extract strategic advantage. Both regulatory measures and internal management regimes have failed to mitigate risks in the UK for SMEs extending trade credit.

Practical implications

The paper concludes that current UK regulatory regimes are unlikely to prove effective and that better management of trade credit may be imperilled by the power imbalances between SMEs and larger firms. The paper suggests areas for the improvement of trade credit management under the headings of policies, people, processes and practices within SMEs.

Originality/value

The paper demonstrates why, despite the risk, UK SMEs offer trade credit and consider how those risks might be mitigated.

Keywords

Citation

Paul, S.Y. and Boden, R. (2011), "Size matters: the late payment problem", Journal of Small Business and Enterprise Development, Vol. 18 No. 4, pp. 732-747. https://doi.org/10.1108/14626001111179776

Publisher

:

Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited