Time To Pay Up?

Small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover. However, for too long, the odds have been stacked against small businesses. Cash flow has always been King says Chris from Expert HR Solutions.

In these difficult times with higher interest rates, rising costs and general lack of confidence in both businesses and the public it is critical.

Have you noticed an increase in late payments and has this delayed your investment plans for your business? The Government claims it is taking serious action to back small businesses and give them the tools they need to grow. At the heart of the plan is a the most significant package of reforms in a generation to tackle late payments, with plans to introduce the toughest laws on late payments in the G7.

Late payments are one of the biggest barriers to small business growth causing cashflow problems that stop firms from scaling up and investing in their future. Every day, hardworking businesses close their doors because they aren’t paid on time. The new laws are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, of potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.

The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.

Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late. We await the details, but businesses already have the right under the Late Payment of Commercial Debts (Interest) Act 1998 to charge interest at 8% over Base Rate for late payment.

These changes will also save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead. Taken together, this will help ensure businesses are paid on time and end the scourge of late payments which costs the UK economy £11bn per year and closes down 38 UK businesses every day.

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