New late payment guidance to tackle growing threat to SMEs
Guidance that aims to tackle late payment practices has now been published which confirms that regulations will come into force in April.
It details that large businesses and limited liability partnerships will need to report their payment practices and performance twice a year.
The data will also include the average time that it takes to pay supplier invoices from the day they are received, while failing to report details will be considered a criminal offence.
Small business minister Margot James announced the new strategy and said it should assist many of the nation’s 5.5 million start-ups that struggle for finance, to survive, and to scale up.
An estimated £26.3 billion is owed in late payments to small and medium sized businesses, which places many under pressure, limits their growth and even causes insolvency in some cases.
The new guidance focuses on the role of larger businesses and calls on them to fulfil their responsibilities in order to improve the overall situation.
The Federation of Small Businesses (FSB), and its chairman Mike Cherry, have welcomed the changes and say it puts the spotlight on poor working practices.
It is claimed that improving payment practices could mean that 50,000 business deaths could be avoided each year, with those firms providing an additional £2.5 billion to the economy.
The FSB has also said that the new rulings will need to be “robustly enforced” and that “proper sanctions” will need to be applied to those who do not meet requirements.
Late payments can restrict growth and prevents smaller firms from competing with larger suppliers – both factors that place great pressure on business cash flow and which can influence the bottom line.
Firms need to adequately assess their situation and should take the necessary measures to protect themselves from a change in fortunes wherever possible.
By Phil Smith
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