New measures to combat late payments have been unveiled by the small business minister.
Following on from actions including improvements of access to finance for small businesses and the appointment of Paul Uppal as the small business commissioner, the Department for Business, Energy & Industrial Strategy (BEIS) unveiled its latest policies on yesterday (4 October).
BEIS has opened a call for evidence, asking businesses to feed back the best ways company boards can put in place responsible payment practices through their supply chains.
“Over the past five years the amount owed to businesses in late payments has halved, but we will go further to make sure all of our small businesses are treated fairly,” said small business minster Kelly Tolhurst.
“Today’s new call for evidence will help us identify the most effective way possible to tackle this issue once and for all and ensure small businesses are on a level playing field with their larger counterparts.”
According to BEIS, nearly a quarter of UK businesses report late payments as a threat to their survival and research from the Federation of Small Businesses (FSB) indicates tackling late payment culture could add £2.5bn to the UK economy and keep 50,000 extra businesses open each year.
FSB national chairman Mike Cherry said: “Late payment is the biggest challenge affecting small businesses and it is good to see the government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly.
“The voluntary prompt payment code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.”
Print companies previously backed the FSB’s calls for the government to do more to tackle late payments, and Chancellor of the Exchequer Philip Hammond pledged to do so in his Spring Statement. In BEIS’ latest announcement, the government pledged to pay at least 90% of its own undisputed invoices from SMEs within five days.
Ian Carrotte, chief executive at credit specialist ICSM, said: “On one hand it’s great that late payments are again in the government’s sights, but the business world – and the print sector in particular – has been talking about this for many years and it still hasn't been resolved.
“A call for new evidence and promoting technology which will help counteract late payers doesn’t fill me with confidence that this is going to get properly sorted any time soon.
“The fact is the print sector is under so much financial pressure that hundreds more businesses will probably be driven to the wall by late payments before a proper platform is in place to sort it out.
“Can print companies do anything before protection is in place? Absolutely.”
Nationwide Print managing director Julian Hocking said his St Austell-based business had taken matters into its own hands rather than wait for government policy to tackle late payment culture.
“We do a lot of due diligence before we deal with someone and generally all of our clients tend to be very good players,” he said. “If there’s an indication that they might pay late then we have a chat with them and if it continues then it becomes too risky to deal with them – we cannot afford to accommodate late payers.
“All of the big internet-based companies emerging these days are used to [customers] paying upfront anyway, this is the way business is done now. I think with print there are a lot of traditional companies doing things the old way and as everything moves online, and a younger generation comes in, we will see this start to change.”
Another policy suggested by BEIS was the promotion of innovative technologies, such as the latest accounting software, to counteract late payments. Nottingham-based Fast Graphics was previously blighted by late-payers and has now started making use of the Experian credit service to keep an eye on the viability of its clients.
Managing director Tony Bates said: “Experian is vital in order to monitor whether the companies we work with have a good credit rating, but also whether they are timely payers or not. We have used it for years and it is money well spent.
“A lot of businesses will take on big customers without thinking, but it is good to be confident about yourself and make clear your terms of trade from the start. We do not take on business until it has been past our financial director. It can be a lot of work, but it puts you in a strong position to be assertive and organised.”