Over the last few years, the Government has made various announcements about curtailing the practice of late payments to small businesses.
Back in March, the Chancellor announced as part of his Spring Statement, a crackdown on this practice that causes over 50,000 SME’s to go out of business every year. On June 19th, the Minister for Small Business, Kelly Tolhurst, finally unveiled a new package of measures she says will ‘end the unacceptable culture of late payment’. Her proposals include introducing new powers for the small business commissioner and holding boards to account for their practices.
According to the Federation of Small Businesses (FSB) it is estimated that 97% of businesses have been paid late at some time and the problem tends to disproportionally affect small firms. Mike Cherry, the FSB’s national chairman, called the new proposals a ‘victory for small businesses’ and added ‘Everyone deserves to be paid on time when they have done the work and provided the goods and services requested.’
The Government has said that it will consult on introducing further new powers for the small business commissioner. These would include the power to enforce information requests and disclosure of payment terms and practices, and to impose binding payment plans or financial penalties on larger business that pay late. A new legislation has also been proposed to allow for the prosecution of large businesses that do not comply with an existing requirement to report their payment practices twice a year.
Although the proposed measures are a positive step there are a few things that small businesses can do now to help combat late payments:
Don’t forget to agree payment terms in advance before starting any work and include your terms in your invoice. Make sure your invoices are very clear and send them out promptly after you have completed the work. Don’t forget to follow-up any unpaid invoices with your clients and remind them to make their payment to you.