We may be well into a new year, but it seems the main issues affecting businesses remain the same, with research showing a vast majority are still suffering the effects of late payments.
It’s an issue that’s always on the agenda, both in terms of business groups campaigning for better practices and various Government measures designed to reduce the problem.
Towards the end of last year, the Government was consulting on proposed new measures which it hopes will create a better payment culture, including empowering trade bodies to highlight best and worst practices, promoting innovative technologies such as accounting software and seeking views from some of the UK’s 5.7 million small businesses.
Now a new campaign by the Federation of Small Businesses is hoping to really hammer the message home as small firms call on politicians and big businesses to end the problem of late payments and stop supply chain bullying for good.
Fair Pay, Fair Play campaign for late payment
Fair Pay, Fair Play puts forward three key reforms which the FSB says will help end the ‘poor payment crisis’ in the UK. These are to enlist the help of non-executive directors, strengthen payment enforcement and adopt Project Bank Accounts in public procurement.
Research by the organisation shows that 84 per cent of small businesses report being paid late, with a third reporting that at least one in four payments owed arrives later than agreed.
National Chairman of the FSB, Mike Cherry, said: “Poor payment practices are not limited to the private sector and they stunt job growth and damage economic growth. At the heart of this scandal, however, lies a more important question about fairness and what is morally right.
“Why do we find ourselves in a situation where some think it is acceptable and fair to not pay our small businesses on time? The truth is that it isn’t fair – everyone deserves to be paid on time. “In last year’s Spring Statement, the Chancellor listened to the FSB and promised to act on the late payments crisis. As this year’s Spring Statement approaches, small businesses want him to follow up these words with tangible actions. Our reforms are not the silver bullet that will suddenly signal the end of poor payment practices, but are certainly an important and necessary steps towards this. I am calling on all politicians and big businesses to back these reforms and show that they believe in fair pay and fair play.”
Here's a more detailed overview of the measures proposed by the Fair Pay, Fair Play campaign.
- Non-executive directors. The FSB says that large businesses should be required to assign a non-executive director with responsibility for payment practice and supplier relationships.
- Strengthening payment enforcement. Companies which fail to provide Duty to Report on payment practices data should be fined while the Small Business Commissioner should be able to carry out mystery shopper-style investigations into the payment practices of large firms. All FTSE 350 companies should be required to sign up to a strengthened Prompt Payment Code.
- Project Bank Accounts. These should be adopted as the default choice for major procurement projects with proper parliamentary oversight to ensure accountability.
Invoice finance for late payment
While the same discussions seem to take place year in year out, it’s difficult to know when true change will be felt by the smallest businesses at the front line of this problem. In the meantime, businesses might want to explore some of the options which take measures into their own hands. These include improved credit control procedures and funding solutions such as invoice finance, which sees a lender taking the burden of the majority of the debt tied up in unpaid invoices.