Tackling the ongoing ‘scourge of late payments’
The Chancellor’s recent Spring Statement included renewed commitment to continue tackling the problem of late payments, in a move which has been welcomed by the country’s small businesses.
Chancellor of the Exchequer Philip Hammond presented his first Spring Statement to the Government earlier this month, to update on progress and the state of the economy’s health since the Autumn Budget.
It was announced that the next business rates revaluation will be brought forward to 2021, from 2022. This means businesses can benefit from the change to three-year revaluations earlier.
Up to £80million of funding will also be released to support small businesses in engaging apprentices as the Government works towards its commitment of delivering three million apprenticeship starts by 2020.
There was also renewed commitment towards eliminating the ‘continuing scourge of late payment’ with the launch of a ‘Call for Evidence’ to see how this can be done.
Tackling the culture of late payments was a key ask from small businesses and follows a raft of new measures from the Government to tackle the problem.
These include strengthening of the Prompt Payment Code, the Duty to Report, the creation of a Small Business Commissioner as a method of recourse for dispute resolution and a commitment to reform corporate governance.
Duty to Report
Although the Duty to Report came into effect in April last year, it is expected to really gather pace in the coming months.
The move introduced a duty on the UK’s largest companies and LLPs to report on their payment practices, policies and performance on a six-monthly basis for financial years after April 2017.
This applies to large businesses which have more than 250 employees, £36million in turnover, or £18million on the balance sheet.
Businesses meeting at least two of the above criteria now have to report a number of indicators including their standard payment terms, the average time taken to pay, the proportion of invoices paid beyond agreed terms, the proportion of invoices paid in 30 days or less, 31 to 60 days and more than 60 days.
Firms can check when large businesses pay their suppliers on GOV.UK.
Small Business Commissioner
In December, the Government launched the complaint handling service of the Small Business Commissioner, Paul Uppal. This will primarily handle complaints from small businesses about unfair payment practices. The commissioner’s website also provides guidance on payment issues and how businesses can take action if a payment is overdue.
Back in December the Government reported that the amount owed to smaller businesses has more than halved from £30bn to £14bn.
However, the Federation of Small Businesses reports that more than 30% of payments to small businesses are late, with an average value of £6,142 per invoice.
‘Impact of poor payment practices gaining recognition’
Responding to this week’s launch of a consultation to improve the UK’s corporate governance framework, the FSB’s national chairman, Mike Cherry, said:
“After the commitment from the Chancellor to eliminate the UK’s late payments epidemic in his Spring Statement, it is pleasing to see the Business Secretary matching it with his own commitment to continue to reform corporate governance.
“At the very top of Government, we now see recognition of the scale and impact of poor payment practice by too many larger businesses and that more needs to be done. These practices place small firms under financial pressure and at risk of closure, with eight out of ten small businesses now reporting being paid late.
“This increased focus on the UK’s poor payment culture is due to positive measures like the Duty to Report on payment practices, the appointment of the Small Business Commissioner and the tightening of corporate governance rules announced today. However, it will take more to see a fundamental shift in culture and the total outstanding invoices paid late by the UK’s biggest businesses.”