Joanna jensen learned something quickly when she started her own business: making sales is hard enough, getting paid for them is harder still.

There are some high-street retailers who will pay you on 75-day terms with a 2.5 per cent haircut if you want it earlier. i am staggered this is still allowed. i thought highway robbery was outlawed, she says. uk retailers demand enough stock to sell nationally, but will only pay suppliers in arrears.

Her childs farm personal care brand of child-friendly moisturisers, shampoo and the like made from natural ingredients, which she founded in 2010, has reached 20m turnover this year. but it needed assistance from the manufacturer of its products in its early days.

Medichem, the manufacturer, granted long credit terms so she could pay them for the goods once they were sold. i also sold all the jewellery i had, she says.

Now she uses invoice finance to manage her cash flow. hsbc bank will pay her for the invoices she sends out, then collects the money from the customer, charging a fee for the service. but she says the system is stacked against small companies.

Average payment terms vary widely across the world, according to dun & bradstreet, the consultancy. its annual report on payments in 2019 found that in thailand 53.8 per cent of bills were paid on time, with just 1.1 per cent not paid for at least 90 days. in portugal the same figures were 16 per cent and 11.6 per cent.

The pandemic has changed things even more. in july two-thirds of companies in hungary, which came last in the list of 25 countries ranked for prompt payment, had bills outstanding after 90 days. in japan, no companies had bills outstanding.

The european commission has long tried to tackle the problem in the eu and in 2011 passed the late payment directive. this obliged public authorities to pay for goods and services within 30 days or, in very exceptional circumstances, within 60 days, while businesses had to pay within 60 days.

If not, the creditor could charge interest at least 8 per cent above the european central banks rate, with a minimum of 40 for recovery costs.

However, small suppliers are very reluctant to enforce this for fear of losing contracts.

A 2018 study by the eus executive body found that fewer than 40 per cent of businesses were paid on time. in some sectors, such as construction, retail, or food, payment delays exceeding 30 days and more are almost systemic, said the commission.

It also concluded that 6.5m jobs could have been created if businesses had paid each other on time, adding: in the short to medium term, late payment can lead to cash flow issues, income loss, slow growth and an inability to hire new employees, which in turn has direct consequences for gdp and employment.

The situation has worsened during the pandemic, as companies hoarded cash. the directive alone is not enough and the commission is working with member states to improve enforcement, including a late payment observatory to name and shame offenders, and possible alternative dispute resolution mechanisms.

The uk is no exception, according to the federation of small businesses. some 62 per cent of companies have been subject to late or frozen payments in the wake of the covid-19 outbreak, according to a july study of more than 4,000 companies.

The latest data show the sum of late payments due across the country rose 80 per cent year on year to 23.4bn at the end of 2019.

Pay. uk, which runs the bacs direct credit and direct debit payment services, says uk smes face a bill of 4.4bn a year to collect money they are owed.

Previse, a fintech company that offers invoice discount finance with money paid within 24 hours, has tracked the impact of the pandemic.

From march 11, late payments almost doubled compared with the year before and continued at high levels throughout april as lockdown took hold. payment times have now settled back to normal levels but could rise sharply as the government imposes new restrictions on hospitality companies.

Our data shows that lockdown had a direct impact on the speed of payments to smes, says paul christensen, previses chief executive. we need every small business in the uk to have the option of day-one payment if we are going to avoid a catastrophic number of bankruptcies and the inevitable rise in unemployment that follows. the technology is available to make day-one payments.

Previses algorithms can identify the few problematic invoices, enabling the rest to be paid instantly. such technology is perhaps the biggest hope for those wanting to solve the late payments crisis.

Bharat mathur, uk payments leader at ey, the consultancy, says big software providers such as sap and oracle are developing payment platforms that could help customers pay on time. many companies still use paper-based systems and manually check invoices, he says.

Hamish thomas, uk head of banking technology consulting at ey, says the pandemic will accelerate the move towards digital payment. but he warns that while banks want to invest in new technology, they also need to cut spending while the economic environment is uncertain. fintechs and banks and corporates and governments working together, that is how these sorts of problems are solved.

Ms jensen believes tighter regulation is essential. he cites the example of the groceries supply code of practice introduced by the uk government in 2013, which introduced an adjudicator to enforce fines for breaches. by 2020, this had led to a fall in the number of suppliers reporting late payment to 12 per cent from 35 per cent.