Late payment regulations in force to aid small businesses
Large businesses now have to start reporting on their payment practices, as government regulations to tackle late payments are in force.
With more than £26 billion owed to the UK’s small and medium sized businesses, according to payments processing firm Bacs, the need to act is clear.
The small firms that are paid late can face significant cashflow issues and it can also inhibit their ability to grow, or to invest in new products and services.
As part of the Government’s Industrial Strategy to improve wider economic conditions and create an economy that works for all, late payments are viewed as a pivotal issue to address.
It is why large companies and limited liability partnerships now have to report their payment practices for the financial year.
Under the new regulations they must twice annually reveal information including the average amount of time it takes for them to pay supplier invoices.
Any business that meets two of the three following criteria in the past two years will need to provide information.
- £36 million turnover
- A balance sheet totalling £18 million
- 250 employees or more
All of the information will be available online, allowing suppliers to be well-informed when it comes to decisions over who to do business with.
Support for small businesses is deemed important as they account for 99.9% all businesses and for 60% of private sector employment – while contributing 47% of total UK private sector turnover.
Giving these businesses the support required will therefore be a target for the new small business commissioner when they are appointed in the autumn.
The BDRC SME Finance Monitor has also revealed the state of the UK’s SMEs throughout the first quarter of the year, with many not prepared to apply for external finance, despite a number of alternative finance options being available.
The proportion of businesses that were willing to borrow in order to trade decreased in the three month period, as did the proportion willing to use finance to grow.
It is hoped that the new regulations will improve cashflows for small firms by encouraging the faster processing and payment of invoices, thus reducing the risk of insolvency faced by those businesses.
By Phil Smith
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