Late payment proposals target large businesses
The government has unveiled a new set of measures designed to tackle later payments and large businesses that abuse their position in the market.
Small business minister Kelly Tolhurst unveiled the plans as around a quarter of the UK’s businesses suggest late payments are a serious threat to their survival.
The Federation of Small Businesses has said the move could ensure an additional 50,000 firms are able to keep trading, while it could add up to £2.5 billion to the economy.
Following the appointment of a small business commissioner in late 2017, the government has moved to address the late payment epidemic that is engulfing UK companies.
The government has called for evidence to find the most effective ways of tackling late payment processes, and especially the actions of larger firms that use their payment processes to exert pressure on smaller suppliers.
Efforts are also being made to promote innovative technology that can support small businesses with managing payment processes, as well as plans to empower trade bodies to highlight best and worst practice.
Ms Tolhurst said although the amount owed to small businesses in late payments has halved in the last five years, there is still a need to improve the system to help make firms less susceptible to insolvency.
The Federation of Small Businesses has welcomed the move, with national chairman Mike Cherry saying the government is “getting serious” about the issue of late payments.
He called for the proposal of a “tough and transparent compliance regime” and backed government department efforts to pay 90% of undisputed invoices within five days.
Business secretary Greg Clark revealed at the start of October that the Small Business Commissioner is also set to join the Prompt Payment Code’s compliance board in a further step to tackle late payments.
In the summer of 2018, it was suggested that close to £15 billion is owed to small businesses in unpaid invoices, which places immense pressure on cash flow and can force firms into insolvency without action.
Firms facing financial issues should seek advice regarding appropriate options and may want to undertake an independent business review if they wish to streamline their operations.
By taking an unbiased look at a company’s finances, forecasts and assets, it’s possible to develop a strategy for a more financially secure future.
By Phil Smith