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Good news on late payments?

What is late payment?

Legally, if no explicit payment terms have been agreed, payment is assumed to be due after 30 days for the purposes of charging statutory interest.

Most paid late. Four out of five small businesses are routinely paid late, according to the Federation of Small Businesses. The average owed is £6,142 and 50,000 firms could be going out of business every year because of problems getting money in on time. The cost is estimated at £9,000.

And it’s got worse. Independent analysis by Bacs Payment Schemes, published in December 2018, showed that more than one third of SMEs wait two months beyond the agreed terms; in 2017 it was one in five. The number experiencing late payments was also up from 37% to 43%. What’s more, 28% of business owners said they have had to cut their salaries to maintain cash flow.

And worse. Suppliers may even get punished further as the standard terms for some companies includes a prompt payment discount - in other words, you get less money if they pay on time. Of course, as a small business you are well aware of the headache caused by clients who don’t pay on time. But is there light at the end of the tunnel?

New laws

The government has long been promising new regulations to tackle this issue, but firms will have to wait a little longer for it. In the 2019 Spring Statement the Chancellor said that last year’s consultation on the matter will be “published shortly”. However, he did announce that company audit committees will have to publish detailed accounts of payment practices and performance in their annual reports. They will also need to appoint a specific non-executive director responsible for their entire supply chain.

Check them out

You can check out the payment history of large companies online (see The next step ) or if they have signed up to the prompt payment code.

Note.  Many companies haven’t yet had to report on their payment practices and the code has already been deemed a waste of time (companies sign up but there’s nothing to stop them paying much later than the 30 days).

Another useless exercise? The other resource is the Small Business Commissioner, who is meant to help out those with fewer than 50 staff that have issues with late payments. He didn’t exactly hit the ground running - it took ten months from his appointment in December 2017 to get a website, for example. We’ve been keeping an eye on the site and it’s being populated with some useful advice now.

Or a useful resource? There is a page with ten top tips. Most of them are quite obvious but if you combine them all and apply them to your invoicing policy, you’ll have more chance of getting money in on time. Of the 300 businesses that approached the Commissioner last year, they received an average of £7,000 back each.

For a link to payment practices, visit http://tipsandadvice-business.co.uk/download (CD 20.14.07).