Will the Chancellor's 'crackdown' on late payments make a difference?
Last year I flagged how our late payment culture is severely hampering UK businesses. We now reportedly have the highest rate of late payment in the world, and UK companies spend more time chasing unpaid invoices than in any other country. Earlier this year the government promised to take action. In his Spring Statement, Chancellor Philip Hammond announced measures to crack down on these poor payment practices, but experts are divided as to the impact the proposed changes will have.
Required responsibilities
As reported in the Financial Times, once these measures take effect big companies will be required to review their payment practices and to publish the results in annual reports. To oversee this change, such companies will need to appoint a non-executive director with responsibility for reducing late payments to smaller suppliers.
The proposals were welcomed by the Federation of Small Business (FSB) and the Confederation of British Industry (CBI), who see this increased accountability as a vital stepping stone in changing payment practices. In particular, making the reporting of late payments in annual reports a standard practice will allow stakeholders to question the company's progress on the issue.
Unspoken realities
However, other commentators are concerned that the changes are vague, and that the Chancellor has given no timeline for their introduction. In the Spring Statement Hammond says "My RHF the Business Secretary will announce further details in due course", and contractor body IPSE fears this is a continuation of a "holding pattern of consultations" that has continually delayed government action on late payments.
Elsewhere, the Association of Taxation Technicians (ATT) say that accountability isn’t enough to change bad habits. Speaking to Contractor UK, policy expert Brian Palmer warns that "simply tightening reporting requirements... doesn’t lead to better practice". This is a stance SMEs are likely to agree with – as discussed in a previous post, surveys have already shown that 62% of SMEs want stronger legislation on late payments, while 63% say the worst offenders should be fined.
Continued efforts
The worry is that government lawmakers will continue to avoid tackling the issue directly for at least the medium term. SMEs can take advantage of other measures designed to support them during tough times, such as the £700m plan to relax rules on funding apprenticeships, or initiatives in specific sectors like the £1 billion Enable Build SME guarantee fund to support house builders.
However, SMEs must also continue to fight against late payments and to plan for them in their business model. That means optimising invoicing processes to ensure clients don’t fall into arrears, and having systems in place to collect unpaid debts in a prompt, sensitive and efficient way. It must be recognised that clients who don’t pay are not valuable, and working with experienced, ethical Enforcement Agents like Dukes Bailiffs can help you reclaim that value for your business.
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