At Safe Collections, we’ve been banging the drum on the UK’s late payment culture for years, making the case over and over again that without the stick of meaningful enforcement, there is little incentive for large companies to stop holding smaller suppliers over a barrel when it comes to payments.

Finally, it seems like the message may have gotten through to the government, although on account of the time it has taken, we can only conclude they are listening reluctantly.

The Department for Business, Energy and Industrial Strategy (BEIS) is currently consulting on a radical shake-up of measures to stamp down on late payments. If this feels a bit like deja vu, you wouldn’t be wrong. We wrote about another consultation exercise on exactly the same issue a little over two years ago. And that wasn’t the first time either.

Meaningful action

However, there are definite signs that the government may be on the verge of stepping off the tired merry-go-round of voluntary codes, naming-and-shaming and stern words that it has clung to for the past decade. This time, and for the first time, it is suggesting it is ready to bear its teeth with meaningful enforcement. The measures it is consulting on include:

• Handing the Small Business Commissioner the power to force companies proven to have broken payment terms to pay up.
• Fines for those that do not comply with an order to pay.
• A legal obligation for firms to comply with investigations into payment complaints.

All of this is very welcome, and not before time. An obvious conclusion is that, with the havoc being wreaked by COVID on company cash flows and liquidity, the government has realised it cannot afford to let a situation continue that cost small businesses an estimated £23.4bn in overdue payments last year, plus £4.4bn taking action to chase that money.

But that latter point raises one thing we feel is missing from this latest set of proposals. Tough enforcement action backed up by the threat of fines is the only way to shift the culture and ensure large companies to stick to agreed payment terms. But we know that thousands of late payments are not pursued simply because of the costs involved in taking action against debtors. The Small Business Commissioner’s office will not be able to compel firms to pay, or investigate their payment practices, if large numbers of small businesses are reticent about pursuing claims because of the costs.

That is why we would like to see additional support for small businesses, in the form of increased late payment penalties to be added to the debt as recompense for the time and effort it requires to chase money they are owed. If you agree, you still have time to share your views, with the consultation open until 24th December. Click here to take part. 

Image by Oliver Menyhart from Pixabay