Government announces proposed new powers to tackle late payments.
James Salmon, 20/06/2019.
The Government has again made noises about trying to tackle late payments and break the cycle of the late payment culture in the UK with a range of proposals announced yesterday.
The Government finally launched the long-awaited response to its Creating a Responsible Payment Culture Call for Evidence.
With the Department for Business, Energy & Industrial Strategy (BEIS) updating the following link
https://www.gov.uk/government/consultations/creating-a-responsible-payment-culture-a-call-for-evidence-on-tackling-late-payment
Readers of our posts will know that tackling the late payment culture is a passion of ours.
The government proposals outlined included impelling larger firms to report on their payments practices in their annual report, broadening out Section 172 reporting requirements that have recently been introduced.
The proposals also included holding company boards accountable for payment practices to small businesses within their companies in a drive to increase transparency and accountability on late payments.
Proposed measures will force Audit Committees to report payment practices in company annual reports.
The government will also consult on strengthening the powers of the Small Business Commissioner to hold to account those larger businesses who fail to make payments on time. New powers 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.
Responsibility of the voluntary code of best practice – the Prompt Payment Code – will be moved to the Small Business Commissioner. This will put tools to tackle late payment under one organisation, ensuring the Commissioner has the powers to affect culture change in unfair payment practices (the SBC will oversee the Code, rather than BEIS directly, but the CICM will continue administering and hosting it).
Another proposal was to take a tough new approach to large companies which do not comply with the Payment Practices Reporting Duty – an existing mandatory requirement on large businesses to report payment practice to a national database twice a year. The legislation allows for the prosecution of those which do not comply, and fines may be imposed. The government will consult on giving these powers to the Small Business Commissioner.
And they also proposed a Business Basics Fund competition of up to £1 million in funding to encourage businesses to use technology to simplify invoicing, payment and credit management to ensure they work as effectively as possible.
CPA View
While we welcome all publicity regarding the issue, CPA recognises that these are just proposals at the moment and they have been lots of false dawns in the past.
It may seem like a dry topic but late payment causes so much pain. This is not just a nuisance! Late payments kill off thousands and thousands of otherwise perfectly good companies. And there is a human cost too! How many business owners lose sleep over late payment? How many worry about losing their homes? How many families and marriages are wrecked in the aftermath of late payments inflicted on small business owners and the resulting insolvencies?
Late payment is strangling the UK economy and causes far more damage each year to the economy, to businesses and to peoples lives than the potential cost of a no deal brexit – and how much press and attention does that get?
Some of the measures/proposals announced sounds good. Especially those that hit late payers in the pocket.
However there is no genuine consensus of will to sort it out. Nobody actually wants to take real action. Suppliers don’t want to punish current customers – they value goodwill above prompt payment. They certainly want to get paid on time and also usually agree they should receive a realistic compensation for late payments. What they don’t want to do is to take responsibility (or blame from their customers) for the compensation being applied.
CPA like the idea of fining persistent offenders but the idea is only being put out to consultation at the moment. the concept of serial late payers being forced to settle their bills under “binding payment plans.” is also interesting but we will have to wait to see the details and how broadly the powers would be used.
However, the overriding feeling is that Government needs to be bolder and come up with more immediate and automatic measures to help small businesses struggling with late payment.
They could adopt the Spanish interpretation of the EU regulations and have a blanket ban on terms over 60 days. They could reduce the the maximum terms from 60 to 30 days. They could obligate customers to pay compensation and interest when they pay late.
At the moment, too many businesses see paying their suppliers late as the cheapest form of capital and the easiest way to boost cash flow.
Measures need to be taken to change that view and to make it unattractive and expensive.
CPA’s view has been that late payment legislation already provides the tools to affect that change.
We recognise that not many businesses want to apply the late payment legislation measures to existing customers. And those customers know it too. Which is the problem.
But what about applying for late payment compensation and interest retrospectively to those late paying customers after they stop using you as a supplier and can no longer threaten you with a loss of their goodwill when you ask to be rightfully compensated?
If businesses knew that was a threat, they might change their view of late payment as a form of cheap cashflow.
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cashflow.
Don’t let your bankers control you, contact CPA today.
What others said – Small Business Minister
Kelly Tolhurst MP, small business minister, delivered a statement to the House of Commons announcing measures to ensure that businesses get paid on time.
Small Business Minister Kelly Tolhurst said “The vast majority of businesses pay their bills on time, with the amount owed in late payments halved over the last five years. But as a former small business owner, I know the huge impact a late payment can have on the ability of a small business to plan, invest and grow.”
“Small businesses are the backbone of our economy and through our modern Industrial Strategy we want to ensure the UK is the best place to start and grow a business. These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly – ending the unacceptable culture of late payment.”
What others said – Small Business Commissioner
The Small Business Commissioner’s Office was set up by government in 2017 to tackle the issue of late payments. It has already recovered over £3.8 million and more powers will enable it to tackle this unacceptable culture and do more to champion businesses across the UK.
Small Business Commissioner Paul Uppal said “During the first 16 months of my post I have been struck by the trepidation felt by small businesses when talking about late payment with their large suppliers. The government has a range of measures in place to tackle late payment and this consultation is a further step in the right direction to protect and support small businesses. I welcome any additional provisions which will strengthen the influence my Office has in tackling poor payment practice and levelling the existing playing field.”
What others said – Chartered Institute of Credit Management
Philip King, Chief Executive of the Chartered Institute of Credit Management said “We welcome this announcement and in particular the proposal to bring the Prompt Payment Code under the auspices of the Small Business Commissioner in a managed transition.”
“We will continue to work closely with the Commissioner and the government in supporting small businesses and driving cultural change and look forward to engaging with existing signatories and wider stakeholders in shaping the best practice principles of the future.”
“This ambitious package of measures will level the playing field for the UK’s 5.7 million small businesses, delivering on the modern Industrial Strategy’s ambition to make Britain the best place to start and grow a business. Ending the culture of late payments will pave the way to boost SME productivity, remove barriers to growth and improve cash flow.”
What others said – Labour Party
Responding to the announcement, Labour’s Shadow small business minister Bill Esterson said: “It is scandalous that some large firms use late payment to help their own cash flow at the expense of their smaller suppliers.
“Labour’s plans for binding arbitration and fines for persistent late payment and payment in 30 days as a pre-condition for bidding for public contracts would give small businesses the support they need.
“The government’s apparent conversion to the cause of tackling late payment is welcome but they will need to give the small business commissioner far greater power and resources if they are serious about taking the necessary action.”
Labour outlined their alternate pledge for late payments in their 2017 manifesto, and look set to keep the policy.
What others said – Institute of Directors
Edwin Morgan, Interim Director General of the Institute of Directors, said “These proposals mark a significant step forward in the fight against late payments. In particular, forcing larger firms to report on their payment practices will ensure much greater scrutiny where standards fall short, and sunlight is often the best disinfectant.”
“We are delighted that the Government has heeded the IoD’s calls to make this a whole-board approach, against suggestions that responsibility be allocated to an individual board member. All board members must get to grips with this issue, and the collective nature of board decision-making is a crucial pillar of effective corporate governance.”
The IoD welcomed this move, saying it was ‘delighted that the Government has heeded the IoD’s calls to make this a whole-board approach’. It said the requirement would ‘ensure much greater scrutiny where standards fall short, and sunlight is often the best disinfectant.’
What others said – CBI
Josh Hardie, CBI Deputy-Director-General, said “Late payment disproportionately impacts smaller firms, so the government is right to be focused on helping SMEs.
“Companies of all sizes know that fair payment terms sit at the heart of strong business relationships. Where performance isn’t up to scratch, firms are moving swiftly to improve their practices, in line with their legal reporting responsibilities.
“Getting this right is absolutely a board-level issue. For large firms, it is in their interest to treat supply chains fairly and transparently. Those with persistently poor practices should know there is nowhere to hide.
“We look forward to working with the government and Small Business Commissioner to ensure any new powers are used proportionately and constructively to accelerate the progress now being made on eradicating late payment.”
What others said – AAT
The AAT said almost a quarter of insolvencies (23%) are caused by late payment issues. Even for those companies that manage to absorb late payment, the loss of income can stop businesses from investing and growing, it can also damage productivity and generally has a very negative impact.
Phil Hall, AAT Head of Public Affairs & Public Policy, said:”AAT is naturally pleased that Government has accepted our recommendation to give the Small Business Commissioner powers to impose fines on persistent late payers, which should have a deterrent effect on many late payers.”
“Moving the Prompt Payment Code to become the Small Business Commissioner’s responsibility also makes sense.”
“However, AAT is very disappointed that despite a wealth of support from businesses across a wide variety of sectors, and the vast majority of MPs, Government has again ducked the opportunity of taking more meaningful action by compelling large employers to sign the Prompt Payment Code and to halve maximum payment terms under the Code from 60 to 30 days.”
What others said – FSB
Mike Cherry, National Chairman of the Federation of Small Businesses, said “Small businesses will be delighted with today’s announcement. “Federation of Small Businesses” has worked very hard with government to create a whole-board approach to late payment within the UK’s large companies, and empower Audit Committees to look after the supply chain. Together with measures to strengthen the Small Business Commissioner’s powers and reform the Prompt Payment Code, the measures today could finally see an end to poor payment practice. Changing our business culture will boost the small business community, productivity and growth.”
“Late payments and poor practices are a scourge which leads to the closure of 50,000 small businesses a year. Today’s measures will for the first time see the culprits brought to account. When small firms are paid late, it causes financial hardship and stifles growth. Everyone deserves to be paid on time when they have done the work and provided the goods and services requested. No one should have to wait months on end to receive the money they’re owed.
“By forcing audit committees of big businesses to report payment practices in company annual reports, there will be no more covering-up by those who treat smaller suppliers shabbily. FSB has long campaigned for the measures announced today, and it is very welcome to see them being put into action. We will continue to work with the Small Business Commissioner as he seeks to make full use of his new powers.”
“Ending late payments and poor practices is not only the right and fair thing to do, it will also spare small firms the financial impact of waiting for the money they’re owed, and instead allow them to invest and grow.”
What others said – Accountants
Proposals announced by the UK government to fine large companies who continue to pay small businesses late do not go far enough, according to UHY Hacker Young.
“Whilst a deterrent for businesses, these fines do little to help recipients of late payments,” said Peter Kubik, partner at UHY Hacker Young in an email. “For those small businesses who have already waited three months to get paid, the damage has already been done,” he added.
Kubik was sceptical about the changes, calling for greater detail from the government before they can claim to have solved the problem. Indeed, there is still no clarity from the government on what specifically constitutes late payment, while the Prompt Payment Code remains voluntary.
“[The] new proposals do not get to the root of the problem as large businesses could still operate with lengthy payment terms. At present, there is no hard and fast definition of what ‘unfair’ payment terms are so a lot of businesses at the top of the supply chain could operate with 90-day terms. This can be tough on SMEs who have tighter margins,” he said.
“If these proposals go as far as explicitly defining how many days is too long to pay suppliers and what constitutes unfair or even grossly-unfair payment practices, then this will push real change,” Kubik said.
“There is also the worry of whether the fines will be substantial enough to deter large businesses from delaying payments to suppliers. The new approach relies on large businesses to self-report their payment practices and this will need to be closely monitored,” he added.
What others said – NFB
The National Federation of Builders (NFB) appreciates the Government’s commitment to put forward plans to crack down on late payment, but these proposals do little to improve the situation of construction companies on the ground.
Measures to strengthen the role of the small business commissioner by giving him power to fine late payers and handing him greater responsibility over the Prompt Payment Code are certainly welcome, but they remain mere proposals which do absolutely nothing to help companies suffering from late payment now.
The Government needs to be bolder and come up with more immediate alternatives to help construction businesses struggling with late payment.
Richard Beresford, chief executive of the NFB, said: “Despite changes to the Prompt Payment Code, 50,000 businesses fail every year because of late payment. Even the department for business admitted that payment times are getting longer. How many more businesses have to go under before we make late payment a thing of the past?”
Nick Sangwin, NFB national chair, said: “These proposals for consultation will further expose the failure of the Government to tackle late payment. It’s time to do the right thing and kill off late payment, rather than kicking the can down the road once again. Today’s announcement does not help small construction businesses who are about to go under because they are owed money. Nothing has changed for SMEs.”
The National Federation of Builders (NFB) criticised the government for making proposals rather than taking action.
“These proposals do little to improve the situation of construction companies on the ground,” it said. “The government needs to be bolder and come up with more immediate alternatives to help.”
What others said – IPSE
New government measures to clamp down on late payment – including holding boards directly accountable – have been welcomed by IPSE (the Association of Independent Professionals and the Self-Employed).
IPSE research has found that two thirds of the self-employed have suffered from late payment, and they have lost an average of 20 days a year chasing delayed client payments.
IPSE’s Deputy Director of Policy Andy Chamberlain commented: “The late payment culture that so many big businesses get away with needs to change. For the two thirds of self-employed people who experience it, late payment means no income, empty bank accounts, debt and possibly destitution. Today’s announcement is a welcome step in the right direction.
What others said – BBC
For those not up at 5am to listen to the business news on the radio, Danni Hewson and Mickey Clark discussed the new powers to tackle late payments to small businesses on this mornings BBC’s business news show “Wake up to Money” and you can listen to it here :- https://www.bbc.co.uk/sounds/play/m00061xb
You can also access the podcast here on apple podcasts. https://podcasts.apple.com/gb/podcast/wake-up-to-money/id128929173#episodeGuid=urn%3Abbc%3Apodcast%3Am00061xb
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cashflow.
Don’t let your bankers control you, contact CPA today.
If you are also struggling, do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you are struggling and sold B2B on credit then there may be a hidden source of capital you can call on.
If you need extra capital, rather than shutting down or jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could be the cash rescue your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
Do you sell on credit?
With pressures on the UK economy it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
With tightening cash flow they will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
See the section below – About CPA.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
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