Big Firms Could Be Charged in Latest Late Payment Crackdown
Proposals released by Small Business Minister Kelly Tolhurst will make the boards of big companies more accountable for late payments to small businesses.
And, for the first time, large firms could be fined if they don’t pay smaller suppliers on time.
The amount owed in late payments has halved over the last five years, but the government wants to go further to support the nation’s smallest businesses.
In a set of broad-brush proposals, the government said it would consult on beefing up the Small Business Commissioners powers, reorganise the Prompt Payment Code and create a fund to promote the uptake of faster payment technology.
Small Business Minister Kelly Tolhurst said: “The vast majority of businesses pay their bills on time, with the amount owed in late payments halved over the last five years. But as a former small business owner, I know the huge impact a late payment can have on the ability of a small business to plan, invest and grow.
“Small businesses are the backbone of our economy and through our modern Industrial Strategy we want to ensure the UK is the best place to start and grow a business. These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly - ending the unacceptable culture of late payment.”
Under the plans, the Small Business Commissioner could be given new powers to compel businesses to give up information about their payment terms and practices. When a large company’s payment practices are deemed unfair, the Commissioner would also be able to impose fines or payment plans to make sure smaller businesses get paid.
The Small Business Commissioner will also take on responsibility for the voluntary Prompt Payment Code, making the office a one stop shop for all issues relating to late payments.
A new Business Basics Fund competition of up to £1 million will encourage small and medium sized businesses to use technology to simplify invoicing, payment and credit management to ensure they work efficiently.
Mike Cherry, National Chairman of the Federation of Small Businesses, said: “Small businesses will be delighted with today’s announcement. FSB has worked very hard with government to create a whole-board approach to late payment within the UK’s large companies, and empower Audit Committees to look after the supply chain.
“Together with measures to strengthen the Small Business Commissioner’s powers and reform the Prompt Payment Code, the measures today could finally see an end to poor payment practice. Changing our business culture will boost the small business community, productivity and growth.”
Miles Grady, Director of Cloud Accountant, said: “This proposal will be welcome news for the UK’s 5.7 million small businesses, many of which are threatened with closure as a direct result of late payments.
“We are particularly pleased that the government has recognised the role that technology can play in accelerating back-office financial processes to get paid on time. Cloud accountancy software packages like Xero and FreeAgent have launched a number of new features to streamline invoicing and payments. Small companies that use these features have a much better chance of getting paid on time.”
For more information on cloud accountancy software packages like Xero and FreeAgent, please speak to a member of the team. Call: 0808 281 0303.