Government Aims to Reduce Late Payments to Small Businesses
For the 5.6 million small businesses that currently operate in the UK, getting paid on time is a top priority. In a bid to safeguard the vitality of British small businesses and keep cash flows healthy, Small Business Minister Kelly Tolhurst has announced strict new measures designed to ensure companies get paid on time.
“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,” says Tolhurst.
A core contributor to the national economy
Currently, small businesses account for more than 99% of all private sector businesses. Furthermore, they employ around 16.3 million people, represent 60% of all private sector employment in the United Kingdom and contribute a huge £2 trillion of annual turnover to the British economy. With so much at stake, ensuring the health and prosperity of small businesses is now a top priority for the British government.
Under the new regulations, large businesses could be hit with big fines if they fail to settle invoices with small-scale suppliers on time. According to Tolhurst, the hard-hitting package will tackle late payments head-on and combat growing issues with subpar supply chain payment practices. Non-compliant businesses will be slapped with hefty fines and forced to take accountability for late payments.
Ending the “culture of late payment”
One of the most powerful measures will be forcing Audit Committees to report improper payment practices in annual reports released to the public. The Small Business Commissioner is also set to receive more powers that will help it hold larger businesses accountable for late payments.
These powers could include the forced disclosure of payment terms and practices, as well as the ability to administer financial penalties and enforce legally binding payment plans. The Small Business Commissioner will also be transferred responsibility of the Prompt Payment Code, a voluntary convention that outlines best practice principles for paying suppliers.
“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,” adds Tolhurst. “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.”
A smooth transition to transparent supply chain practices
The government is hoping for a smooth transition and is encouraging larger businesses to embrace technologies designed to simplify invoicing and payment processes. This will be bolstered by the Business Basics Fund backed by £1 million in capital.
Mike Cherry, National Chairman of the Federation of Small Businesses is confident the new regulations will have a positive impact for both small businesses across the UK, asserting that “changing our business culture will boost the small business community, productivity and growth.”
Small Business Commissioner Paul Uppal agrees, saying “The government has a range of measures in place to tackle late payment and this consultation is a further step in the right direction to protect and support small businesses.”
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