Government acts to tackle contract payment issues
The government is set to provide greater support to small businesses looking to procure contracts by tackling poor payment processes.
Under new plans, suppliers will be excluded from major government procurement contracts if they are unable to prove that they have adequate payment practices.
Cabinet minister Oliver Dowden unveiled the proposals which also include giving subcontractors greater powers to report poor payment performance.
The high profile collapse of Carillion in January showcased a number of poor payment practices, but it is only part of the picture.
Small businesses across the UK are owed billions of pounds in unpaid invoices and it can put a severe strain on their cash flow.
The government has worked to tackle poor payment practices and the new proposals should enable more small businesses to win major contracts.
Mr Dowdon said that 33% of procurement spending should be with small businesses by 2022 under government targets.
Under the new rules, suppliers will need to advertise subcontracting opportunities publically on a Contracts Finder website, which will include details on business activity.
As well as making the whole sector more transparent, it should also ensure that small firms are given a fair opportunity of securing contracts.
Government contracts also provide a steady stream of income which can help with expansion or market consolidation.
Federation of Small Businesses chair Mike Cherry has also said that late paying companies should not be “rewarded” with contracts and that larger firms should be held to account for their behavior.
Firms struggling with late payments who are unable to overcome their cash flow difficulties can end up facing insolvency if they are unable to restructure effectively.
Acting quickly can increase the range of possibilities that are available, while options reviews can provide an assessment of a situation and offer advice on the best route to take.
By Phil Smith