The government has announced new regulations to help small businesses get paid quicker when supplying large companies.
The new ‘duty to report’ will require large companies and limited liability partnerships (LLPs) to publicly report twice yearly on their payment practices and performance, including the average time taken to pay supplier invoices.
It’s hoped this will put a spotlight on bad practice and lead to improved standards.
A survey carried out by the Federation of Small Businesses showed that, on average, 30% of payments are received late. Government figures suggest the amount of money outstanding at any one time could be as high as £28 billion.
The new measures aim to tackle this problem by increasing transparency and helping small businesses make informed decisions when dealing with large companies.
Small Business Minister Margot James said: “Unfair payment practices and unnecessary red tape hamper the ability of small businesses to grow and have no place in an economy that works for all. By shining a light on how large businesses pay their smaller suppliers, we want to empower small businesses and drive a real change in payment culture.”
Mike Cherry, National Chairman of the Federation of Small Businesses, said: “The comprehensive and regular duty to report is the first step to combat a business culture that feels like one where it is acceptable to pay small firms late. It is not acceptable – we estimate that 50,000 business deaths could be avoided every year, if only payments were made promptly – adding £2.5 billion to the UK economy. We need to see executive board level engagement and scrutiny of payment practices to deliver lasting cultural change.”
The duty to report requirement is one of a number of measures to tackle the issue of late payment. Others include the appointment of the Small Business Commissioner, who, from autumn this year, will support small businesses in resolving payment disputes.
The government also has a manifesto commitment to find £10 billion worth of deregulatory savings for business from unnecessary regulation that stands in the way of growth.
The duty to report will come into effect in April this year.
For more information about this article or for advice on debt collection and credit control, please call Lionel Curry on 020 8907 2000or click here to email him and he will be delighted to help you (there is no charge for an initial telephone discussion).