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Government purchasing and SMEs: The end of late payment culture?


Recent figures have revealed that UK Government spending on SMEs topped £12.1 billion in 2015, representing a 27.1% share of all expenditure. Equally good news for small businesses came with the announcement that 17 of the government’s 33 strategic suppliers have agreed to sign up to a Prompt Payment Code. Could an end to late payment culture be just around the corner? 

The context

The government's initial 2015 target figures suggested that small businesses should account for 25% of spending. The fact that Westminster broke its target by 2.1% and is pledging an increase to 33% of spending by 2020 will be sweet music to SME ears.

This hike is unequivocally positive for small businesses, but many media outlets are reporting the boost alongside news of Prompt Payment Code (PPC) sign-ups. While there's no doubt that both events indicate a positive trend, reports mentioning the PPC require a little qualification, as the government really needs all of its partners to sign up if it wants to set a clear UK-wide standard.

Late payments hurt SMEs

A fully-subscribed PPC would benefit SMEs all over the country. In September, the Asset Based Finance Association (ABFA) revealed that UK SMEs were sitting on £67.4 billion worth of unpaid invoices. However, that figure takes on even greater significance when considered in tandem with the fact that SMEs wait an average of 72 days to receive payment.

Widespread uptake of the PPC would encourage payment completion inside of 30 days, which is the period the current 17 partners have agreed to observe. A national reduction to this timeframe would enable SMEs to claim their rightful earnings quicker, thereby improving their financial stability.

More work to be done

There’s no denying that the existence of 17 PPC partners is good a first step for SMEs, but the government needs to bring its full influence to bear if late payment culture is to come to a final halt. Thankfully, there's a obvious solution in the meantime – SMEs can be proactive in claiming their unpaid invoices by enlisting the help of ethical Enforcement Agents like Dukes Bailiffs.

If you own a small business, contact Dukes today to start beating late payment culture and future-proofing your business.

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