Government urged to protect smaller firms against poor payment practices
James Salmon, Operations Director, 19/02/2019.
The Government has been urged to protect smaller firms against poor payment practices.
The Federation of Small Businesses (FSB) wants the government to introduce measures to end a culture of late payment and “supply chain bullying.”
The federation’s research found that 84% of small companies had been paid late and a third (33%) said at least one in four payments they are owed arrives later than agreed. Meanwhile, nine out of ten public sector suppliers say that they have been paid late.
All FTSE 350 firms should sign Prompt Payment Code
The FSB recommends a number of measures to tackle the problem, including the assignment of non-executive directors with responsibility to prevent late payment. Large businesses should be required to assign a non-executive director with responsibility for payment practice and supplier relationships, by chairing a supply chain committee or including supplier relationships in chairing the audit committee, and be required to provide a summary of their activity for the company’s annual report.
The FSB also wants payment enforcement to be strengthened, and recommends that the government fines those businesses that fail to provide incomplete duty to report on payment practices data. The Small Business Commissioner should be able to mount ‘mystery shopper’ style investigations into the payment practices of large firms including verifying duty to report on payment practice data and investigating “supply chain bullying.” Also, all FTSE 350 firms should be required to be signatories of a strengthened Prompt Payment Code.
Finally, the organisation wants so-called project banks accounts – a trust account that would prevent big contractors from misusing suppliers’ cash – to be the default option on major public work.
Some big businesses have been allowed to get away with poor behaviour for “far too long”
Mike Cherry, the federation’s national chairman, said: “For far too long some big businesses have been allowed to get away with poor behaviour that has seen them use their dominant position to bully and squeeze our small firms. This behaviour has forced many small businesses to take drastic steps, like turning to personal credit cards and overdrafts, just to survive the wait for a payment. Sadly, some don’t survive this wait.”
He continued: “Our reforms are not the silver bullet that will suddenly signal the end of poor payment practices, but they are certainly important and necessary steps towards this. I am calling on all politicians and big businesses to back these reforms and to show that they believe in fair pay and fair play.”
Call for “tangible actions” from chancellor
The FSB wants the chancellor to use his forthcoming spring statement to introduce tougher rules to prevent poor payment practices and to adopt the project bank accounts to protect suppliers’ money on public procurement work.
“In last year’s spring statement, the chancellor listened to FSB and promised to act on the late payments crisis. As this year’s spring statement approaches, small businesses want the chancellor to follow up these words with the tangible actions,” Mr Cherry said.
Philip Hammond is scheduled to deliver his spring statement on March 13th.
Business lending to SMEs should be regulated
In related news regarding the cashflow and finance of small businesses, writing in the Mail, Ruth Sunderland argues that business lending to small and medium-sized businesses should be regulated to stamp out exploitative practices.
She says the Financial Ombudsman must be given a big increase in staff and funding so it can deal with cases properly, or a tribunal system is created which has real teeth. Ms Sunderland ends by saying that the market must be fixed in order to restore trust in banks, adding that the least entrepreneurs deserve is fair and transparent banking.
SMEs urged to plan ahead for Brexit
SME’s are facing so many challenges at the present. On top of late payment and financing there is Brexit.
The Times reports that UK Finance and groups including the Federation of Small Businesses (FSB), the British Chambers of Commerce and the CBI are set to urge SMEs to “plan ahead” and make contingency plans for Brexit.
The bodies are expected to issue guidance recommending that such firms consider how customers and suppliers could be affected by Brexit. The FSB estimates that around just one in seven small companies has started planning for a no-deal Brexit.
Meanwhile, Barclays says it will host 100 Brexit “clinics” in branches around the country, as well as in its Eagle Labs-branded co-working spaces. Jes Staley, chief executive of Barclays, said the clinics will help small companies to “prepare and cope with whatever Brexit will bring”.
Firms call for greater MTD support
In timing that could only be planned by a dis-jointed government, HMRC are also using this moment to push through a major change to the collection of tax information with “making Tax Digital” (MTD). A KPMG poll of 1,000 UK businesses shows that 64% believe Making Tax Digital (MTD) is “a good idea” but more support needs to be provided ahead of the April 1 deadline.
Just 12% are both supportive of the introduction of MTD and ready for the deadline.
The survey saw 5% of respondents say MTD will be damaging to their business while 19% say it will offer their business no benefits.
Chris Downing, tax partner at KPMG, commented: “With just over a month to go until the deadline, it’s worrying to see that almost two-thirds of businesses [are saying] that they need more support and are still in the process of working out what they need to do.” he added: “This could potentially be both costly and time-consuming, depending on the changes that need to be made.”
How can CPA help?
With MTD and Brexit, most SME’s would agree they really need to make sure their finances are secure.
Therefore any support with late payments and cashflow is vital.
Are you affected by late payment of invoices?
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.
CPA can help you avoid bad payers and we can encourage and speed up late payers.
We can get those late overdue invoices owed to you by your customers paid and into your bank account, giving you the cash flow to boost your business.
But we can go further. We can help you recover debts that you didn’t even know you were owed!
If you have supplied your 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 small 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.
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.
CPA have developed unique technology and systems that can interact with over 300 different accounting packages to unearth these claims, hidden in your accounting records and calculate the extra capital that you are owed.
We then have then can use extensive experience to recover those claims from your former business customers.
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 bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply to restaurants, help us help you identify the risks.
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.
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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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