The government says it’s introducing “the most comprehensive support package in a generation” for small companies falling victim to slow payments.
A statement from the Business and Trade Department says small and medium sized firms employ 60% of the country’s workforce and generate £2.8 trillion in turnover but “for too long, the odds have been stacked against them.”
New laws likely to be introduced to Parliament before Christmas are set to give stronger powers to the Small Business Commissioner to empower them to wield fines, worth potentially millions of pounds, against the biggest firms who persistently choose to pay their suppliers late.
The Small Business Commissioner will be given new powers to carry out spot checks and enforce a 30-day invoice verification period to speed up resolutions to disputes. The upcoming legislation will also introduce maximum payment terms of 60 days, reducing to 45 days, giving firms certainty they’ll be paid on time.
Audit committees, under the proposals, will also be legally required to scrutinise payment practices at board level, placing greater pressure on large firms to show they’re treating small suppliers fairly backed by mandatory interest charges for those who pay late.
These changes “will save small businesses valuable time, freeing up hours currently spent chasing overdue invoices so they can focus on growing their business instead” says the department, which claims that currently late payments force 38 UK businesses to shut up shop every day.
Business and Trade Secretary Jonathan Reynolds says: “This country is home to some of the brightest entrepreneurs and innovative businesses in the world, and we want to unleash their full potential by giving them back time and money to do what they do best – growing our local economies. Our Small Business plan – the first in over a decade – is slashing unnecessary admin costs, making it easier for businesses to set up shop and giving SMEs the financial backing they need.”
A spokesperson for the Federation of Small Businesses (FSB), Tina McKenzie, says: “Making sure businesses are paid on time, that our high streets thrive, and creating conditions in which everyone can start and succeed in business are crucial priorities for small businesses, communities and the economy. It’s very welcome that the Prime Minister has today made them his government’s priorities.
“I’m pleased that FSB and the Government have been able to work in lockstep on the bold and ambitious measures needed to tackle the scourge of late payment through legislation, and other pro-growth, pro-small business measures.”
