SMEs Rally Around Late Payment Legislation

16th May 2018.

Basware along with YouGov have released a survey with input from over 2,000 small businesses in the UK, the results find more than half support a change in the law around late payments.

Despite the government’s best efforts, late payment continues to linger. Small and medium-sized business have persistently demanded a tough approach to bringing down late payment, but the government has historically preferred reconciliatory tactics.

Now a survey has revealed the severe risk posed by late payment to the so-called lifeblood of the economy. The new data found that 665,000 businesses out of the 2,658,9853 SMEs in the UK have come close to bankruptcy because of payment issues.

The survey of over 2,000 small businesses with less than 250 staff further found that more than half support a change in the law around late payments. Frustration is mounting as the government remains reluctant to twist the knife on self-confessed late payers, and pressure builds on business finances as the Brexit deadline nears. A quick and painless solution to the problem seems necessary to keep the bulk of business relationships intact.

At the Credit Protection Association, we have helped our members with late payment for years and patiently await the day when our services will no longer be required. Our role is not only to repair the damage inflicted by late payers but also advise our members on how to pay their own suppliers on time.

The survey found six-in-10 backed the introduction of a 45-day minimum payment term. More than six times as many SMEs want new laws as don’t.

A further 18 percent (an estimated 120,000 businesses) said they had been forced to put recruitment on hold on account of late payment. A further 13% (around 86,500 firms) had been forced to let staff go due to the problem.

Across all respondents, half of those businesses saying they have experienced late payments pointed the finger at big businesses (250 employees+) as the source of the issue.

While there are several new options available to SMEs to help mitigate against late payments, including credit management and debt collection companies, it is no wonder that so many SMEs are keen to see politicians act.

Louis Fernandes, Country Manager of Basware in the UK, said: “SMEs are the backbone of the UK economy and critical to our competitiveness through Brexit. The UK needs to take steps to help SMEs improve productivity and realise cost savings where they can. Technology will be important and we are seeing more and more firms come to us looking for help with payments automation and different financing models, but it’s clear that late payments cause massive issues for firms. This is an issue where big and small businesses can come together to solve the problem.”

The problem of late payment has been debated, dismissed and argued over for far too long. The topic is well-worn and it is time something is done to finally put the matter to rest.
Various initiatives such as the Prompt Payment Code were ultimately ineffective and proved that merely asking businesses to pay on time was not a successful tactic. A tougher approach has become a popular option within the business community, with many small businesses unable to afford further debt or delayed payment.
At the Credit Protection Association, our debt recovery services chase down unpaid invoices and residual debt, freeing up cash flow that our members utilise for expansion projects or to build up their savings. Furthermore, our credit management products protect our members from further harm, with our credit checks and company directories purging business finances from harmful figures.
At CPA, we also fight to get our members rightly compensated in accordance with the Late Payment of Commercial Debts (Interest) Act 1998, unlocking hidden cash and potential in our members and their prospects.