Time to pay up
Small businesses just want to be paid on time and so they should. That’s the clear message from the UK Government last month as it cracks down on late payments with the largest set of reforms in over 25 years The post Time to pay up appeared first on Elite Business Magazine.
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As Small Business Commissioner, me and my team deal with hundreds of enquiries from small businesses – freelancers, tradespeople, family firms, manufacturers – all with a similar story: quality work delivered promptly, but payment is anything but. These new measures will tackle this problem and empower small businesses who currently spend hours each year chasing unpaid invoices.
Here are five ways that these reforms could benefit anyone running a small business.
Clarity on when you’ll get paid
The new legislation introduces a 60-day limit on payment terms for large firms paying smaller suppliers, with strictly limited exemptions. No more open-ended agreements or undefined “standard payment terms” that leave small businesses in the dark. If you know you’re due payment in no more than 60 days that gives you the ability to plan your finances with greater confidence.
Late payers will face real consequences
For the first time, my office will have powers to investigate poor payment practices, adjudicate payment disputes and fine the worst offenders, with fines worth up to tens of millions for firms that persistently pay late or fail to comply with the new laws.
Interest on overdue payments is automatically applicable
Under the new rules, mandatory interest at 8% above the Bank of England base rate will be applied to all late payments. So, if someone owes you £10,000 and pays 60 days late, you’ll be owed £10,293.15 – that’s £10,000 plus £193.15 interest plus £100 compensation. Persistent late payers should think twice before using smaller suppliers as a form of free finance.
Large companies will be held accountable at board level
This one matters. Boards and audit committees of large companies will be legally required to scrutinise and publicly report on their payment performance. My team and I speak with many large businesses who don’t intend to pay late, but have out-of-date processes that consistently delay payment and are expensive to update. When payment failures land on a CEO’s desk and appear in a publicly available annual report, behaviours and processes change fast.
Get your time back
Right now, small business owners are wasting hours – 86 every year according to our research – chasing payments. That’s time you could spend winning new clients, developing products, or simply doing the work you love. These reforms are designed to make prompt payment the norm, not the exception. Less chasing debt means more building your business.
My team will also continue to manage the Fair Payment Code, awarding and celebrating those businesses demonstrating best practice. We also provide free advice for businesses looking to improve their payment processes. If you think you could achieve an Award or you would like support with your payment practices, please contact the team via: fpc@smallbusinesscommissioner.gov.uk. My hope is that the combination of support, tighter legislation and stronger powers for my office will help to make life easier for small businesses.
The post Time to pay up appeared first on Elite Business Magazine.
