Bid to tackle late payments misery

The government has announced what it describes as tougher measures to tackle the issue of late payments to small businesses.

It says measures, which will be included in a soon to be published ‘Prompt Payment and Cash Flow Review’ will improve enable more small firms to get paid on time.

The measures have been broadly welcomed although there have been calls for the chancellor to do more to address the issue in his autumn statement later this month.

The chartered accountants body ICAEW has also revealed late payments are adding to finance woes, with cheque payments “becoming a thing again”.

New research has shown the scale of the problem. A report at the end of October revealed late payments to small businesses have hit a three-year high.

Late payment of invoices and long payment terms are key issues that businesses, especially SMEs, highlight as a barrier to their growth.

Owners and managers are forced to spend disproportionate time chasing payments; resulting cash flow problems cause even good, viable firms to struggle.

In 2022, SMES were owed on average an estimated £22,000 in late payments.

The government says that improving payment culture in the UK could boost the economy by £2.5billion annually.

Following consultation, it says it will take forward legislation to extend payment performance reporting obligations.

That will include new metrics for reporting, including a value metric, so businesses and commentators can see the value of invoices, including invoices paid late, and a disputed invoices metric.

In a statement the Department for Business and Trade said: “We will also introduce reporting on retention payments for businesses in the construction sector.”

Other measures include providing greater advice to small businesses on negotiating payment terms that better suit them, and on how going digital can help them get paid quicker and manage their cash flow.

There is also a commitment to broadening the powers of the Small Business Commissioner:

These include enabling the commissioner to undertake investigations and publish reports where necessary on the basis of anonymous information and intelligence. This measure will require primary legislation.

The statement added: “The stronger measures will benefit UK businesses by fostering a stronger payment culture and providing businesses with more predictable and reliable cash flow, allowing businesses to spend and invest with greater certainty.

“It will reduce the time spent by businesses chasing payments, freeing up more time for other activities that will help them to grow. Tackling late and long payments provides an opportunity to increase investment and productivity across the economy.

“This will improve payment culture in the UK to support smaller businesses, many of whom do not have the resources to accommodate long or late payments from their business customers.”

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