If you are self-employed chances are you will have experienced the scourge of late payments at some point. We recently spoke to a self-employed tradesperson who had to turn down a big job because the 90-day payment terms of the corporate meant he couldn’t afford the cashflow to pay his colleague in the meantime. There was no choice, he missed the opportunity to grow his business because the payment terms made it impossible.
Yesterday (02/10/23) the government promised to take more action on late payments, so there is certainly some awareness of the difficulties it can create.
What has been announced?
The government has committed to extending current payment reporting obligations to include new metrics to show the value of invoices, value of those paid late, and those that are disputed. Construction retention records (value set aside from invoices for defects) and payments are included in the new regime. In addition, two other measures have been promised:
- Greater advice to businesses on negotiating payment terms and managing their cashflow
- Enhanced powers for the Small Business Commissioner to undertake investigations based on intelligence and anonymous information received
The second point could prove to be a game-changer as it gives some much-needed ‘teeth’ for proper action to be taken against serial late payers. Ultimately it gives you a voice that really can make a difference.
According to the government, improving payment culture in the UK will support smaller businesses, and could boost the economy by £2.5 billion annually.
Secretary of State for Business and Trade Kemi Badenoch said:
SMEs make up 99 per cent of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that.