Call for evidence to combat late payments to small businesses

Mark Aspin, Director and Head of Dispute Resolution

The government is urging businesses to highlight their experiences of late payment and put forward ideas to ensure earlier settlement, especially by large companies.

One in four UK businesses say that late payments are a threat to their survival.  Research by the Federation of Small Businesses suggests that prompt payments could add £2.5 billion to the UK economy and keep an extra 50,000 businesses open each year.

The call for evidence seeks views on:

• the current experiences of businesses in their payment practices
• the impact of existing measures to improve payment practices and what more can be done to further refine measures and promote good practice
• whether new measures should be introduced to further encourage a responsible payment culture
• the best way company boards can put in place responsible payment practices throughout their supply chain, for example by giving a non-executive director specific responsibility for the company’s prompt payment performance.

The publication of the new call for evidence follows the announcement that the Small Business Commissioner is to join the Prompt Payment Code’s Compliance Board to support his role in tackling late payment.

The Federation of Small Businesses (FSB) National Chairman, Mike Cherry, said: “The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.

“Involving the Small Business Commissioner Paul Uppal with the code is right as it shows a more joined-up approach to this difficult issue. Further, it is a positive step that central government will set an example – paying 90% of undisputed invoices from small and medium-sized businesses within five days.

Small Business Commissioner Paul Uppal said: “Some large businesses use late payments and extended payment terms to exert control over small businesses in their supply chain, and the government will now seek the views of the UK business community on how best to ensure small businesses are given a fair deal.”

The call for evidence is open until 29 November 2018 and the government is encouraging, businesses, trade associations and other interested parties such as academics to contribute their views to it.

If you need any advice or would like to discuss any of the issues raised in this article, or would like help with debt collection and credit control please contact Carly Davies on 01228 516666 or click here to email Carly direct.