The government is planning tougher measures to tackle late payments to small firms so more can get paid on time.
The Prompt Payment & Cash Flow Review, due to be published shortly, aims to reduce the payment backlog which last year saw SMEs owed an average of about £22,000 in late payments, causing owners and managers spending disproportionate time chasing payments, and making even good, viable firms struggle.
New measures to be announced in the review will include:
- Extending the Reporting on Payment Practices and Performance Regulations 2017. Following consultation, Government will take forward legislation to extend payment performance reporting obligations. We 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. We will also introduce reporting on retention payments for businesses in the construction sector.
- 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.
- Broadening the powers of the Small Business Commissioner: Introducing broader responsibilities, enabling the Commissioner to undertake investigations and publish reports where necessary on the basis of anonymous information and intelligence. This will require primary legislation, so will be subject to the legislative timetable.
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.
Small Business Minister Kevin Hollinrake said: “Small businesses form a crucial part of large companies’ supply chains. Without them, they couldn’t do business. It’s only right that they should be paid promptly for their services.
“SMEs that are paid on time can do more business, scale up and make more profits, delivering growth for the economy.”
