SMEs Demand End to Late Payment Culture
8th May 2018.
Britain’s small businesses are demanding new laws to crack down on an “unethical” late payments culture that causes thousands of companies to go bust every year.
The late payment culture has been tormenting small and medium-sized businesses for a while now. Despite various government initiatives, little progress has been made and small businesses are in an increasingly vulnerable state.
In response, suppliers have rallied their support of a tougher approach to bring down bad payment practices. According to a soon-to-be-published report by YouGov and Busware, 61 percent of British companies are in support of new legislation that would force payment of bills within 45 days. A mere 11 percent oppose the legislation. The collapse of Carillion, earlier this year, highlighted the ineffectiveness of government proposals and the severity of late payment practices, with the construction giant allegedly taking up to 120 days to pay its suppliers.
Big businesses still think it acceptable to pay their suppliers late, and this needs to change. Until this cultural shift occurs, swift action should be taken to force them to follow the rules. The government has tried asking them nicely and this has fallen on deaf ears, so setting it in law seems to be the natural next step. This cannot be done without the agreement of the government, however, and until this is acquired, businesses can ask for help from within the business community.
At the Credit Protection Association, many of our members are victims of late payment and have asked for our assistance in fighting back. While fighting late payers within your own four walls is commendable, our resources and one-minded dedication will ensure a positive solution, while allowing our members to focus their own attention to their business.
The Federation of Small Businesses (FSB) estimates that 50,000 companies close each year as a result of late payments, costing the UK about £2.4bn in lost output. Public bodies are among the worst offenders, with research released last week by the FSB revealing that 89% of suppliers to government had been paid late.
“Big businesses and government think it is acceptable to pay late,” said Mike Cherry, the FSB’s national chairman. “It is unethical and immoral to force small business owners to chase payments and to turn to personal credit cards, overdrafts or even laying off staff just to keep their head above water.”
One in four businesses have had their financial viability put at risk because of late payments, the YouGov survey showed, with many business owners forced to use their own finances to plug the gap.
Official attempts to improve late payments have so far fallen flat. A small business commissioner was appointed last year to help companies resolve payment disputes, but received just 48 complaints during the first four months.
Rachel Reeves, the chairwoman of the Commons business, energy and industrial strategy committee, said: “There is a culture of fear among many suppliers that they will be dropped by big companies if they complain.”
The time for exchanging niceties with late payers has passed, and strict legislation should be enforced to ascertain a long-term resolution. Setting the rules in stone and by a gavel should stop big businesses exploiting payment terms and putting small business finances in jeopardy.
Until the legislation has been approved and a long-term solution has been established, business owners can approach third parties for help in combating late payment in the short term.
At the Credit Protection Association, our debt recovery and credit management services free up cash flow while conducting the correct credit checks to protect it. 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.
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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