In recent years the government have taken steps to tackle the problem of late payments, and the effect it has on small businesses.
In June 2019 a package of measures were unveiled by the Minister for Small Business, Kelly Tolhurst MP, where large businesses could be fined for failing to pay smaller suppliers on time.
The consultation has recently concluded, but the measures are aimed at holding company boards accountable for payment practices to small businesses within their companies, in a drive to increase transparency and accountability on late payments. These measures plan to force Audit Committees to report payment practices in the company annual reports.
Setting Standards For Best Practice
To date there has been a prompt payment code, which has been administered by the Chartered Institute of Credit Management www.promptpaymentcode.org.uk. This has set out standards for payment practices and best practice, as well as wider procedures.
As part of the measures, this code is due to move to the Small Business Commissioner. This will put tools to tackle late payment under one organisation, ensuring the Commissioner has the powers to affect cultural change in unfair payment practices.
New powers that have been put forward could include compelling information and disclosure of payment terms and practices, imposing financial penalties or binding payment plans on large businesses found to have unfair payment practices.
There are also a number of other proposals that have been discussed. These include:
- For large companies that do not comply there will be a mandatory requirement to report payment practice to a national database twice a year. This will allow for the prosecution of those not complying, and fines may be imposed.
- The Business Basics Fund. This is an opportunity to compete for funding, to encourage businesses to use technology to simplify invoicing, payment and credit management. The second round of funding has recently closed, but you can find more information at www.gov.uk/government/publications/business-basics-fund
It is hoped that this package of measures will level the playing field for the UK’s small businesses, making Britain the best place to start and grow a business.
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