The government are introducing new policies to tackle the UK’s late payment culture which contributes to thousands of SMEs going out of business each year.
Shocking information releasedby Bacs Payment Scheme Ltd shows that small UK businesses are facing a bill of £6.7 billion (an average of £9,000 per business) just to collect late payments owed to them.
On top of this, more than one third of SMEs are not being paid until two months after the agreed payment terms.
Late payments can be extremely damaging to SMEs, negatively affecting their cash flow, putting them into debt with their own creditors, and preventing them from investing in opportunities to help them grow.
Late Payments and the Economy
As the UK’s late payment culture spirals out of control, the increasing number of businesses going insolvent is having a knock-on effect on our economy.
According to the Federation of Small Business, late payments are costing us around £2.5 billion each year.
Government policies tackling late payments
During the Government’s Spring Statement, Phillip Hammond laid out proposed policies for tackling the UK’s late payment culture.
Key policies relating to late payments include:
- Businesses will be required to appoint a non-executive director who is responsible for reducing late payments.
- Businesses will also be required to publish their payment practices in their annual report.
- Those businesses still guilty of paying suppliers late risk losing Government contracts.
These latest policies join several existing measures including the Government’s Duty to Report and The Office of the Small Business Commissioner (SBC).
The Duty to Report was introduced in April 2017 and requires UK businesses to report on their payment practices, policies, and performance on a half yearly basis. The Office of the Small Business Commissioner was formed later the same year in December 2017 to tackle bad payment practices and help small businesses to resolve payment disputes with larger businesses.
Late payments are a significant contributing factor to the UK’s debt crisis. Bringing about a change in payment culture could help to save thousands of businesses from insolvency and boost the UK’s economy.