It is an issue that successive governments have paid little more than lip-service to for the past five years. Yes, there was the cross-party parliamentary inquiry earlier this year and before that the so-called Prompt Payment Code (PPC) and the optimistic notion of charging interest on overdue invoices.
However, the consensus on the ground is that little has changed for the small business owner, who remains very much at the mercy of his or her clients when it comes to getting paid.
The government has now announced a consultation to tackle the problem, with Prime Minister David Cameron stating the obvious that "late payment can have devastating effects on [SME] businesses" and that "more needs to be done".
Never a truer word and yet – given how long this issue has been on the radar and how little impact previous political involvement has had (only 1,500 of the UK’s 4m firms signed up to the PPC) – there is the unmistakable feeling of déjà vu.
According to data from BACS, SMEs were owed £36.4bn in late payments at the end of 2012, up from £33.6bn in 2011. Meanwhile, the BPIF’s quarterly Printing Outlook shows that the incidence of late payment has increased in every quarter since it started surveying the problem in Q1 2012. If anything, the situation has worsened so far this year.
Alexander Jackman, head of policy at the Forum of Private Business, agrees that the issue of late payment "continues to grow and is having a detrimental effect on the economy".
"Late payment is causing many small businesses to fold consequently eliminating valuable employment opportunities," he adds. "This consultation is long overdue and will undoubtedly receive a great number of replies.
"It is essential the government uses all the evidence submitted to develop some robust policy actions to tackle the problem of late payment effectively."
But it is not just the fact that buyers have been paying late that is putting the squeeze on cashflow, as BAPC chairman Sidney Bobb explains: "If you’re a small printer and you’re supplying a large organisation and they’re paying you on 60 days, for example, and giving you a reasonable amount of work on a regular basis, then that’s fine. But all of a sudden they turn around and say ‘we will now pay 90 days’ and that’s what has the big impact on cashflow."
Bobb advocates a fixed minimum notice period for changes to your payment terms. "Prompt payment is all about knowing where you stand; small companies want to do business with large companies, obviously, but they also want to know where they stand [so] they can gear their operation on that basis," he argues.
This key point is not addressed in the draft consultation questions, which focus more on changing the culture at senior management and board level, while inviting recommendations for strengthening the PPC or introducing further legislation or penalties for late payment.
Given that sudden (negative) changes to terms, or delays in making payments to existing terms, tend to happen in down economies, the impact is felt much more keenly when it comes to SME cashflow.
"I’d like to see every company have a payment policy that is fixed for a period of time so that they can’t all of a sudden – as often happens – change their payment policy and instead of paying to 30 or 60 days, pay to 90 or 120," says Bobb.
Any action is to be welcomed – and certainly a consultation would appear to be a step in the right direction in comparison to the lukewarm response to the recommendations of the cross-party inquiry led by Labour MP Debbie Abrahams.
However, given the failure of any government to make a noticeable impact on this issue – one which everyone agrees is harming SMEs and by extension the economy – in the past five years, there is naturally a certain degree of scepticism about the potential outcome.
It will not have gone unnoticed, for instance, that late payment is back on the political agenda in the run-up to a general election. Particularly given the fact that both central and local government struggle to adhere to the requirements of the PPC, as pointed out recently by Wyndeham Group, which has had problems with late payments from HMRC.
Another concern is that, as the UK returns to a period of sustained growth, the problem of late payments will fall off the agenda, without there having been any legislative changes to protect SMEs when the next downturn comes about. So, while it may seem like déjà vu, it’s important that printers take part in the upcoming consultation while there is sufficient political will to act, rather than sit back and await the next catastrophe with a gallic shrug – ‘plus ça change...’ as the French say.
