Currently, £23.4 billion worth of late invoices are owed to small firms across Britain, impacting on businesses’ cash flow and ultimate survival. On 1 October, to address the scourge of late payment, Small Business Minister Paul Scully announced proposals to ensure small businesses in the UK are paid on time.
The government is seeking to create a culture of prompt payment in UK business. This is essential to enable small businesses to succeed, creating jobs, driving innovation and supporting their community. According to the Federation of Small Businesses (FSB), around 50,000 small companies close each year due to late payments.
And when one considers that £23.4 billion worth of late payments are currently owed to small businesses in the UK, it is not surprising that something needs to be done.
Included in the proposals are:
- Giving more powers to the Small Business Commissioner (SBC) to help small firms with late payment
- Proposed new powers include ordering businesses to pay in good time and issuing fines if they do not, ordering companies to share information on payment practices and the power to launch investigations
The proposals are part of a new consultation launched to look to give new powers to the Small Business Commissioner including:
- The power to order companies to pay their partners, either as a lump sum or agreed payment plan, when a complaint against them for late payment has been investigated and upheld. Companies which do not do so could face further penalties, including fines. This will give a clear incentive for companies to pay their partners on time.
- The power to compel companies to share information during an investigation by the SBC. This will ensure cooperation with SBC investigations and provide more information about company payment practices.
- The power to launch investigations into suspected bad payment practice, without the need to have first received a complaint from a small business.
- Expanding the scope for complaints to the SBC, to allow the Commissioner to investigate complaints about other businesses relating to payment matters in connection with the supply of goods and services.
- To review and report on wider business practices outside of payment matters, on instruction of the BEIS Secretary of State. This could be a practices unrelated to payment matters specifically impacting small businesses such as supply problems, or broader issues like barriers to the adoption of payment technology.
- The power to claim investigation costs from an investigated company when there are adverse findings against them.
- In doing this, the government is seeking to create a culture of prompt payment in UK business. This is essential to enable small businesses to succeed, creating jobs, driving innovation and supporting their community.
Small Business Minister Paul Scully said:
“Late payments are a terrible burden for small businesses, not only disrupting their cash flow but posing a threat to their survival in many cases.
We are committed to tackling this problem, supporting small businesses at this critical time for the British economy by helping them to secure payment on time.
I am pleased to open this consultation on expanding the Commissioner’s powers and welcome the views of businesses that have been affected by this issue.”
This is a really positive initiative by the government – hopefully the seeds of the consultation will ripen and introduce an effective regime to address the late payment culture.