Tougher measures to address late payments to small businesses have been announced by the Government.
In 2022, SMEs were owed, on average, an estimated £22,000 in late payments. This can slow down growth with many companies spending disproportionate time chasing payments that can lead to cash flow problems.
Small Business Minister Kevin Hollinrake said: “Small businesses form a crucial part of large companies’ supply chains. Without them, they couldn’t do business.
“It’s only right that they should be paid promptly for their services.”
The new measures are being proposed as part of the Government’s upcoming Prompt Payment and Cash Flow Review, a scrutiny of current payment practices.
The potential changes include:
- Extending payment reporting obligations with new metrics including a disputed invoices metric
- Providing greater advice to SMEs on negotiating payment terms that better suit them and managing their cash flow
- Expanding the powers of the Small Business Commissioner to undertake investigations and publish reports on the basis of anonymous information and intelligence
- A strengthening of the Prompt Payment Code so that business signatories must reaffirm their commitment every two years to stay on it
‘Measures will help SMES grow and prosper’
Announcing the plans, the Government said they will improve payment culture in the UK to support smaller businesses, many of whom do not have the resources to accommodate long or late payments from their business customers.
Paying small businesses on time could boost the economy by £2.5 billion a year, it is claimed.
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.
“The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.”