New late payment measures fail to excite
James Salmon, Operations Director – 12th October 2023.
While I was away on leave, the government announced “new” measures to tackle the late payment culture that is holding back small businesses and the economy.
These new measures are set to be part of the Prompt Payment & Cash Flow Review, that is due to be published in the near future.
The “new” measures set to be announced within the review are:
- Extending the Reporting on Payment Practices and Performance Regulations 2017. Following consultation, Government will propose legislation to extend payment performance reporting obligations and also include new metrics for reporting, including a value metric, so businesses and other interested parties can see the value of unpaid invoices, including invoices paid late, and a disputed invoices metric. The government will also introduce reporting on retention payments for businesses in the construction sector.
- The government will also provide greater advice to small businesses on negotiating payment terms that better suit them, and on how going digital can help them get paid quicker and manage their cash flow.
- The government will – subject to being able to squeeze new legislation into the parliamentary timetable – broaden the powers of the Small Business Commissioner: Introducing broader responsibilities, enabling the Commissioner to undertake investigations and publish reports where necessary on the basis of anonymous information and intelligence.
- The government claim these stronger measures will benefit UK businesses by fostering a stronger payment culture and providing businesses with more predictable and reliable cash flow, allowing businesses to spend and invest with greater certainty.
Excuse this writers skepticism but we see nothing meaningful here that will impact the late payment practices throughout the British business landscape.
SMEs make up 99 per cent of firms in the UK and are the lifeblood of our economy. But late payments are choking of that lifeblood. It’s only right that SME’s should be paid promptly for their goods and services. SMEs that are paid on time can do more business, scale up and make more profits, delivering growth for the economy.
We at CPA have long argued that stronger measures are needed and that primarily businesses pay late as late payment of suppliers is currently the cheapest form of cash flow that businesses can use. When suppliers are keen to maintain goodwill, the late payment usually comes free.
CPA argues that the late payment culture will only change when late payment of suppliers becomes the most expensive form of capital. Financial chiefs will quickly change payment practices if late payments hit them in the pocket.
This can be achieved with a simple series of measures.
- Late payment compensation levels were set decades ago and haven’t been updated for inflation. the current levels of £40 for debts up to a £1000, £70 for debts between £1000 and £10,000 and £100 for debts over £10,000 are woefully inadequate. These rates should be increased to properly compensate late paid suppliers and deter late payers. We would suggest changing the levels to £60, £120 and £200.
- Still there is the issue of enforce-ability. Take away the pressure of goodwill from small business suppliers and mandate by legislation that all medium and large businesses who pay late must automatically as part of their payment process, add late payment compensation and interest to the payment they make to their suppliers.
- Provide a simplified process for suppliers to claim late payment compensation and interest via the county courts from small businesses who have paid them late.
- Current legislation still allows large companies to withhold payments contractually by setting credit terms of up to 60 days. The perils of unpaid invoices could be reduced by reducing the maximum permissible terms to 30 days, thus speeding up the payment to suppliers.
Introduce the above three measures and the damaging effects of the late payment culture in the UK could be seriously reduced. There would still be the issue of late payments between small businesses and consumers.
Last year Small and Medium-sized Enterprises (SMEs) were due late payments worth on average an estimated £22,000. Late payment of invoices and long payment terms are among the biggest killer of small businesses and one of their major barriers to their growth. When Small business owners are forced to spend half their time chasing late payments they are distracted from carrying out productive work and cash flow problems caused by late payments can choke even the best businesses into insolvency.
If the UK can improve its payment culture, speed up the credit cycle and better support SME’s we could tackle the productivity problems of the nation and boost considerably GDP.
Why should you become a CPA member!
The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid, since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for some time to come.
CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers.
Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you have a commercial late payer that is causing you grief? Use CPA’s no-win, no-fee, commercial debt recovery service!
If you have a particular business customer who is late paying and causing you sleepless nights, why not offer it to CPA for purchase on recourse?
CPA’s collection department will then pursue the debt. We will be liable for any costs incurred and then when we have recovered the debt, we will pay you the net principle debt recovered less our percentage.
Once you have enjoyed that success then you can consider the more cost effective membership which includes our Overdue Account Recovery service and Status/Credit reports as well as a range of other complimentary services.
Just call 020 8846 0000 and ask for Godfrey Nelson or Cris Shirley (business hours) or email debtpurchase@cpa.co.uk today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.
Get compensated for previous late payments
Have you been paid late by business customers in the last six years?
Maybe you no longer work with them. Under legislation, you are entitled to compensation you for those late payments you have suffered.
You put up with the PAIN – now claim the GAIN!
Claim late payment compensation (LPC) from former business customers who paid you late in the last six years!
CPA (LPC) Recoveries is using our bespoke software and decades of experience to do just that for our clients
Check our compensation calculator to see how much your business could be owed!
Discover NOW the potential value of late payment compensation hidden in your sales ledger!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections.