There are signs that the Government is taking the issue of late payments more seriously, but it will probably be sometime before any concrete progress is made
The Telegraph recently reported that a majority of MPs backed calls to fine firms that regularly fail to pay suppliers within 30 days.
For SMEs, it’s a positive piece of news: The Federation of Small Businesses (FSB) argues that the ‘late payment crisis’ - where an estimated £14billion in SME turnover is trapped in unpaid invoices – is responsible for causing the closure of almost 50,000 businesses a year.
If there were more measures to encourage larger firms - which are often the worst culprits - to pay their smaller suppliers sooner, then it would be safe to assume that thousands of businesses could be saved.
Currently, it is difficult to determine how long it will be before any measures will be in place. But it is interesting to note what progress has been made by the Government so far.
Progress so far
Back in October 2018 the Department for Business, Energy & Industrial Strategy held a public Call for Evidence on the issue of late payments. The consultation lasted nearly two months and ended on 29 November. At time of writing, The Department hasn't provided any updates and so we can assume that it is still analysing the feedback.
We can make a fair assumption that we should receive a response by mid-February. This is based on the Government's Consultation Principles 2018 , which state a response should be published "within 12 weeks of the consultation or provide an explanation [for] why this is not possible."
The Government also tightened up its ‘Prompt Payment Code’ in 2017 where signatories agree to pay suppliers within 60 days, with the intention of getting this down to 30 days. Recognisable signatories include retail giants like Asda, Greggs, and Marks and Spencer, city councils, and some of the big banks. It is one measure that currently exists to encourage businesses to commit to timely payments and tackle the ‘late payment culture’, however the code is still voluntary.
Recent pressure for reform
The recent pressure for reform came from a survey of MPs commissioned by the Association of Accounting Technicians (ASA). The ASA have proposed to not only to enforce penalties but to make signing up to the code compulsory for companies employing more than 250 employees. It has boldly suggested tightening maximum payment terms from 60 days to 30 days.
All of these measures would be a big boost for SMEs, but as already identified it’s hard to know when they would happen.
There have been a few signs now and again of some improvement. Also there are several solutions to collecting late payments such as adding interest, which the Government provides a handy guide on, and Invoice Factoring, where you get money upfront and assistance with your credit control from an experienced and friendly credit control team.