Govt to protect small firms from late payment

Thursday 26 February 2015

The government says that it is planning to implement European Union rules on the procurement process, which could help to protect small firms from late payment.

Francis Maude, Cabinet Office minister, said that this legislation would be introduced to mandate 30-day payment terms across all levels of the supply chain for public sector contracts. On top of that, Mr Maude also agreed to remove pre-qualification questionnaires (PQQs).

The news about the 30-day mandate and removal of PQQs was welcomed by The Association of Independent Professionals and the Self Employed (IPSE), which noted that the abolition of PQQs was something it included in its manifesto.

Commenting on this, deputy director of policy and external affairs at IPSE Andy Chamberlain said: "Any action to make it easier for the smallest businesses to gain government contracts should be welcomed. Simplifying the procurement process by removing PQQs is long overdue and is crucial to create a level playing field for the UK's smallest businesses to win government contracts.

"Late payment is a major issue for microbusiness owners up and down the country who rely on regular income to keep their business afloat but chasing payment puts future contracts in jeopardy.

"Although policies to tackle late pay should be welcomed, the problem won't disappear until tough action is taken to change the whole culture of pay by big business."

In relation to the last point, Mr Chamberlain explained that the recent manifesto from IPSE called for a small business conciliation service. This would let self-employed professionals get their payment without having to get embroiled in lengthy court action.

IPSE believes that this service would do a lot in terms of helping to stop the issue of late payment. Recently, the Conservative Party said it would implement the small business conciliation service and this was a commitment that was welcomed by IPSE.

The organisation also added that it hopes all political parties will make a commitment to deal with the issue of late payment ahead of the general election in May. IPSE said it also hopes that they will pledge to cut the red tape that is facing small businesses when it comes to procurement.

Late payment is an issue that has long been a problem for limited companies and sole traders as they have found that they have been subjected to excessively long payment terms.

Research from the Federation of Small Businesses (FSB) found that this was one of the five most commonly used poor payment practices that small firms have been subjected to.

It said that a number of businesses were routinely exceeding the payment terms that had been agreed in a contract or changing them retrospectively so that they could go past payment dates. Another thing that the FSB believes to be common is that big businesses extend payment dates if they owe money on, or close to, the end of a financial reporting date. This is so that they can smooth out their balance sheets.

By Victoria McDonnell

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