March 14 2019
Small businesses have welcomed this year's Spring statement from the Chancellor in which he announced measures aimed at tackling late payments.
“I announced a year ago that we would take definitive action to tackle the scourge of late payments for our small businesses. A full response to last year’s call for evidence will be published shortly, but I can announce today that as a first step we will require company Audit Committees to review payment practices, and report on them in their Annual Accounts. My RHF the Business Secretary will announce further details in due course. “
The regulations will force companies to name and shame themselves, publishing information on how often they pay their bills on time. In this way, the Chancellor hopes to persuade businesses to improve payment performance. There is also a requirement that businesses name a non-executive director with responsiblity which should make it easier to hold companies to account on their payment performance.
The Federation of Small Business (FSB), says that four in five small businesses are routinely paid late, and that the typical SME is owed £6,142 in overdue payments. FSB claims that as many as 50,000 firms go out of business each because of problems related to late payments. Mike Cherry, national chairman of the Federation of Small Businesses seemed delighted with the announcement:
“The end of late payments could finally be in sight. It can't come soon enough, to bolster small businesses at a time when they are in great need of support and a lift in confidence. “
However, Samanta White, CEO of My Credit Controllers urged caution:
“This year we have seen more and more large companies unilaterally impose longer payment terms on their smaller suppliers. By redefining what 'late' means, large companies can still take a long time to pay suppliers and claim that all payments are made on time. Also, large companies (those with a turnover greater than £36m) have had to report on their payment practices since November 2017, with little sign that this is having an impact on behaviour. Our own analysis reveals that many large companies take far longer than best practice 30 days to pay suppliers. “
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