Consultation on late payments to help small businesses

Tuesday 15 October 2013

For many small and medium​-​sized businesses, getting paid on time for the products they supply and the services they provide is a major part of keeping financially afloat.
Unfortunately, for many of these companies, late payments is a part of every-day life and it can cause severe cash flow problems - plus, the process of chasing up payments and re-issuing invoices can use up valuable resources that could be better utilised elsewhere.
​Yesterday (October 14th), prime minister David Cameron ​announced a new government consultation to tackle the problem of late payments - particularly the problems they cause for SMEs​,​ sole traders and contractors.
As part of the consultation, the government will be asking for views on subjects such as how to encourage better oversight and responsibility for payment policies, ways to increase transparency regarding which companies make payments on time and which don't, how to better enforce existing legislation on payment terms and how to strengthen the Prompt Payment Code.
Commenting on the issue of late payments, David Cameron said: "It's not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium​-​sized businesses."
While the UK government has already taken steps to deal with the problem of late payments, Mr Cameron says more should be done to ensure that fair, prompt and reliable payments are made, and this should become a 'core corporate responsibility' that is taken seriously by senior management.
"I am determined to make Britain the best place to start, grow and do business and to back people who want to work hard and get on," he said.
Katja Hall, the Confederation of British Industry's (CBI) chief policy director, explained that businesses already have some options for recourse when paid late, but most avoid acting on late payment because they worry about falling out with their clients.
"The CBI backs the Prompt Payment code but there are also other ways of addressing late payment - for example some suppliers will choose to work with customers through supply chain finance agreements.
"As the voice of small, medium and large businesses, the CBI welcomes this consultation and looks forward to working closely with government to improve payment terms in the UK," she added.
The push to improve payment terms isn't the only good news for small businesses​, as​ ​the National Insurance Contributions Bill ​has also been​ introduced to the House of Commons.
It's expected that the bill, which includes legislation for the Employment Allowance, could cut National Insurance Contributions by £2,000 for around one-third of all UK employers.
Small businesses will see the most assistance from the Employment Allowance, with more than 90 per cent of the benefit going to companies that employ less than 50 people.
National chairman for the Federation of Small Businesses John Allan said that the reduction in tax for small businesses would have a positive impact on small firms and the economy.
"Our members have said they'll spend the savings on their business, either through investing in the business, increasing wages or taking on staff," he explained.

By Victoria McDonnell

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