Three quarters of SMEs voice late payment practice laws concern

New payment practice laws will not solve the UK’s late payment culture, according to three quarters of small businesses.

While 74% of SMEs do not think the guidelines will have an impact, some fear that the consequences of late payments could even worsen as a result.

According to Crossflow Payments, just 17% of the nation’s 5.4 million SMEs believe the new laws will have a positive effect on their business.

Under the Duty to Report regulations, large businesses have to publically report how they pay small business supplies, including the time taken to pay invoices.

It is estimated that £266 billion of turnover is currently outstanding as a late payment, while around one in four businesses say they are regularly paid late.

Around 10% also said that levels of late payments had increased since the EU referendum in June 2016, leaving them to face cash flow difficulties.

Crossflow Payments CEO Tony Duggan has suggested that the “new rules could make a bad situation worse”.

He claims that larger firms will negotiate longer payment terms in order to “shift the goalposts and create the illusion that they are paying on time”.

With the potential impacts of Brexit on the market also unknown, it could become more difficult for small businesses to trade and grow – a situation made worse if they have to wait for payments from suppliers.

The new regulations aim to increase market transparency and businesses could face criminal proceedings should they fail to report properly.

Given current economic conditions, it is unlikely that firms will cut their own working capital in order to pay suppliers faster, which is why longer payment terms would seem likely.

The research also found that four in five SMEs were unaware of the new regulations, meaning they have been unable to use their influence when negotiating with larger suppliers.

A lack of cash flow increases the risk of insolvency for smaller firms, especially if they are operating on tight margins.

For those that are struggling to make ends meet, a range of alternative finance options do exist, but it is important to consider the types of funding, costs and structures that are available.

By Phil Smith


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