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SMEs Offered 5-Day Payment Terms by Govt

Small to medium-sized firms are being promised five-day payment terms from Government as part of a fresh push to stamp out late payment.

In a small victory for small businesses across the country, the government has announced new plans to enforce five-day payment terms. After Carillion collapsed, the truth behind payment terms and practices finally came to light. It was revealed that large firms had been taking up to 120 days to pay their suppliers, manipulating the vulnerabilities of small suppliers to extend payment terms. Not only did this encourage scrutiny but also highlighted the need for an immediate shake-up.

While government initiatives have so far produced limited results, this new announcement demonstrates a tougher approach and could start chipping away at the late payment culture.

Everything always comes back to Carillion. The construction giant collapsed back in January, causing small suppliers to rack up debts far beyond their control. Large firms were consequently accused of supply chain bullying and month-long delays on payment.. While the crisis emphasised the problem, nothing was done to fix it.

The latest Government attack on late payment could be the business community’s saving grace. This move to pay 90 per cent of undisputed invoices from SMEs within five days, encompasses a recent upswing in late payment measures. Such an example would the government’s recent announcement to enforce late payment directors on large firms to oversee payment practices.

Federation of Small Businesses, national chairman Mike Cherry said: “Late payment is the biggest challenge affecting small businesses and it is good to see the government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly.

This stronger intervention from Westminster highlights the severity of the late payment problem in the UK. While once assumed to only involve small business, the endemic is now threatening the whole business culture. If late payment is to be eradicated completely, this will be collaborative effort from Parliament as well as from the firms themselves.

At the Credit Protection Association, many of our Members are self-confessed victims of late payment. Small, large or medium, any business can get hurt by the continued delay of payment. Not only do our debt recovery services free up cash flow, but our credit monitoring facilities keep finances protected.

The combined force of our credit reports, credit checks, directorship and company register and County Court data, all create a comprehensive overview for our Members. This ensures they are fully aware of their customers’ financial activity as well as their own. While we await the success of Westminster’s initiatives, it is important individual firms have the proper defences in place.