Pay late and outsourcers face being blocked from Government contracts

29/11/18

Pay late and outsourcers face being blocked from Government contract.

Government plans to crack down on late payments could see public sector outsourcers blocked from new contracts if they fail to pay their own suppliers on time.

Martin McTague of the Federation of Small Businesses said the new rules would “send a clear message that paying late is not okay.”

He added: “Measures to open up public procurement give tax payers and our public services access to the innovation and value small firms bring, as well as helping our economy.”

Cabinet Office Minister, Oliver Dowden said: “Companies providing crucial services to the public sector ,like delivering road infrastructure projects, must be paid on time.

“Paying invoices promptly is vital in providing healthy cash flow, particularly for smaller businesses who are the backbone of the UK economy, to help them survive and thrive.

“From next year, if government contractors are late with supplier payments, they could stop winning public contracts altogether – until they clean up their act.”

However what about all the companies that are not reliant on government contracts? How can they be encouraged to change their payment methods?

How to truly challenge the late payment culture

James Salmon, Operations Director at The Credit Protection Association said “Anything that can be done to tackle the late payment culture is a positive”

“However, while business customers are still able to threaten to remove future trade from their suppliers, they are able to get away with late payment without consequences as their supplier just sees late payment as an unavoidable cost of doing business and keeping the customer”

He added”late payment legislation provides the tools to truly change the culture. Late payment legislation allows suppliers to go back six years (due to the statute of limitations) and charge compensation and interest on late payments that happened in the past”

“How will this change the culture?”

“Business customers may rely on their trading relationship with a supplier to get away with late payment, but they risk being hit with 6 years worth of late payment compensation as soon as that relationship ends. It would be better for them to pay on time and avoid that risk”

“They may not even end the relationship themselves, the supplier might get into difficulties and realise they have this large untapped asset in late payment compensation that is available to them. Or the supplier might just look at all the late payments over the years, the hassle of chasing and decide that the business customer is worth more to them as an ex customer than they are as a current customer”

“At present, not many suppliers are insisting on this compensation  and therefore it is not at the forefront of businesses minds. The more suppliers pursue late payment compensation, the more businesses will realise that the culture of late payment is not the magical free credit scheme they thought it was and that it does come with a potential future cost.

“Once they discover that every invoice they paid late, no matter how small, could lead to a compensation claim of at least £40, even if it was only late by a few days, then they are going to want to change their operating procedures to avoid future claims.

“They should quickly realise that it is better to pay their suppliers on time and instead finance their businesses cashflow through more traditional means.”

“Those suppliers in turn will them have the cash to pay their suppliers and the chain of late payment can be broken. The late payment culture can be stopped. We have the tools.”

“And getting cash to flow faster through the economy can only boost our nations productivity.”

How can CPA help?

If you sell on credit and have faced late paying business customers then we can help.

At the Credit Protection Association, Our members benefit from our debt recovery and credit management services which give them the tools to avoid and battle late payments. Opening up the financial freedom needed to grow and prosper.

Our new Late Payment Compensation company, CPA (LPC) Recoveries Limited however can help suppliers unlock hidden potential and recover  the compensation due to their businesses.

Integrating the historic ledgers and calculating the claims is a complicated action but CPA has developed the systems to do it. We also have the experience and expertise to collect the compensation and over come the various objections.

We are passionate about wanting to end the culture of late payment and want to work with suppliers who feel the same.

visit our late compensation page

See our full blog and FAQ on late payment compensation

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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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