06 Dec New Proposals Announced To Tackle Late Payments
The UK government have announced new proposals designed to help tackle late payments. The proposals oblige large and listed companies to fully publish detailed information regarding their performance around how they pay their suppliers. For us here at Pay4 this is great news to hear and a long time overdue.
SME’s are often considered the economic backbone of the United Kingdom. Yet larger corporations are squeezing the life out of these businesses by insisting on unreasonable payment terms. The new proposals will help businesses by providing robust information to tackle unfair payment practices.
Mandatory disclosure of payments made
Late payment affects businesses to a huge extent. Nearly 85 percent of UK small businesses over the past two years have been affected, sometimes resulting in business failure . As a result of the new proposals there will be mandatory reporting on a quarterly basis for all large UK companies. Not only will this lessen the amount of late payers, but the UK will become a better regulated and more trusted environment for trade, encouraging more foreign companies to do business here.
The proposals will be incorporated into the Small Business, Enterprise and Employment Bill which is currently going through Parliament and should become law in 2015.
Reveal companies who consistently make late payments
The main aim of the plan, as announced by Matthew Hancock, Business Minister, is to get both listed (public) and large companies to give details about their performance and payment practices. It will therefore help suppliers to see both bad and good practices and make public those companies that consistently make late payments or who enforce very long terms.
Businesses that fall under the remit of the proposals will be required to report the average time taken to pay invoices, and also reveal what proportion of their invoices are paid beyond terms, within 30 days, over 30, 60 and 120 days.
Mr Hancock said: “The measures we are consulting on will make it clear to small businesses and consumers alike which large businesses behave properly, and those that think they can ride roughshod over their suppliers.”
The hope is to improve the payment culture through increased transparency therefore enabling suppliers to make informed business decisions, as well as improve the overall practice and performance of supplier payments.
Bulking up of Prompt Payment Codes
As part of the new law, the UK government is also bulking up the current codes and the measures to include:
- Consulting on ways to tackle the poor payment practices such as giving the bodies higher power in order to challenge unfair practices and payments
- Improving the prompt payment code
- Leading by example in public sector procurement
- Giving the groceries code adjudicator the right power to fine supermarkets if they breach the supply code of practice
Bigger companies use their economic might to impose unreasonable terms that can cause serious cashflow problems for smaller-sized supplier businesses. It is a crucial issue for SMEs in the UK and one that deserves a thorough and comprehensive review.
Late Payment Dispute Resolution
The government is also looking to improve efficiency around the late payment dispute process. The challenge here is to provide fair and transparent policy and procedures around:
- Who is covered by a representative claim and who isn’t
- Which organizations can bring a claim
- The resources that will be available in order to bring a case
Supplier payments are of crucial significance to continued prosperity and the new regulations have been proposed to improve and enhance payment performance to small businesses from larger ones. If these enterprises do not have a medium to grow or their payments are generally delayed, they will not have an incentive to move ahead, and their growth may be stymied.
Here at Pay4 we champion the growth of SMEs in the UK and are very much looking forward to seeing the law being passed next year.