The Government is undertaking a review into late payments for small businesses.
Business Secretary, Grant Shapps announced a comprehensive review into tackling late payments for small businesses, while urging large companies to pay their smaller suppliers promptly.
Small businesses routinely spend significant time and resources chasing late payments from businesses they supply which can lead to cash flow problems, putting their firms at risk and preventing them from growing. The majority of small businesses do not have large balance sheets and cannot accommodate long payment terms or delays to receiving payment within their cash flow cycle.
The Payment and Cash Flow review will scrutinise existing payment practices and the measures in place to make sure small firms are not ripped off by their larger clients – with over £23.4 billion currently owed in outstanding invoices to UK businesses.
The review will consider the progress made in specific sectors of the economy in combatting late payment and will also include an in-depth examination of current payment reporting regulations and the Prompt Payment Code.
In addition, the statutory review of the Small Business Commissioner will help to ensure that the UK has the right arrangements in place to best support small businesses.
Business Secretary Grant Shapps said:
The UK’s 5.5 million small businesses are an integral part not just of our economy, but of our communities too, and this government is firmly on their side.
That many small firms are routinely paid late is intolerable and presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.
This review will allow us to build on the success we have had so far in curbing late payment, unshackling small businesses from this exploitative practice and creating a system that is fit for the future. While we crack on with this work, I also want to remind big businesses of their duty to ensure their smaller suppliers are paid promptly.
It warned that small businesses spend significant time and resources chasing late payments from businesses that supply, which can lead to cash flow problems.
Also within the scope of the review is the role of technology-enabled accountancy platforms in tackling late payments and promoting a better understanding of prompt payment measures within the small business community.
The role of finance, particularly how major banks and innovative lenders can help small businesses manage their cash flow, and identifying barriers to accessing finance, are also part of the review's remit. The review will include a consultation on the payment reporting regulations, setting out specific proposals on renewal and improvement of these duties.
The review of the Small Business Commissioner will consider both its role and effectiveness, drawing on the consultation on the Commissioner's powers that was conducted in 2020.
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To find out more about AccountancyIQ, or for help and advice on managing accounting processes within your business, get in touch.