Late payments cause no end of problems for small businesses. Having to wait 90 days to receive payment after rendering a service can leave SMEs with a colossal hole in their balance sheet, which is why increasing numbers of businesses are decrying lengthy terms and bad payment practices. The government has made no bones about its desire to tackle the culture of late payments and has proposed a new solution to eradicate unfair payment terms for smaller businesses.
Following the groundwork done by the Small Business, Enterprise and Employment Act 2015, which brought in a reporting requirement for the UK’s largest firms to report on their payment practices, the new proposal will see the creation of a small business commissioner to help companies resolve disputes over late payment and other negative supply chain practices. The commissioner will help small firms gain access to advice, support, mediation and conciliation services, as well as being able to investigate complaints and report on its findings.
“Small businesses are owed £26 billion in late payments and spend millions more chasing down money they have already earned through hard work. This is simply unacceptable,” said small business minister Anna Soubry. “The small business commissioner will tackle the imbalance of bargaining power between small suppliers and large customers, and encourage them to get round the table and sort out disputes at a fraction of the cost of going to court. It will also provide advice, investigate complaints and see where further action is needed to clamp down on unfair practices.”
However, not everyone believes this goes far enough. A new survey of 368 business owners from Sage, the enterprise software company, showed that more than two thirds of UK companies have to wait for 60 days or more for payment, whilst more than half have to wait over 90. It seems big businesses are by far the worst offenders, with 67% of business owners thinking they’re the biggest problem compared to just 15% who think the problem lies with SMEs. Moreover 70% of respondents felt that making big business commit to 30 days payment terms would positively affect their business, with more than a quarter maintaining this impact would be significant.
For this reason, Sage has launched its Late Payments Manifesto and an e-petition that it hopes will encourage businesses big and small to commit to 30 day payment terms. Having itself committed to paying its suppliers within 30 days, it is now encouraging other businesses to follow its lead and commit to fairer payment practices.
“Late payments are the scourge of British business today,” said Brendan Flattery, president of Europe at Sage. “For smaller businesses in particular, it can at best cause cash flow issues, and at worst prove fatal. It is disgraceful how some of the larger firms have historically behaved. We believe all businesses have a right to be paid quickly and on time. That is why we are calling for all businesses – big and small – to commit to 30 day payment terms. It is time to make a stand against late payments and say enough is enough.”
Those of you who also want to make a stand against late payments, why not head over and sign the e-petition?