Late payment issues ‘decimating’ SME cashflow
A group of leading industry bodies is calling on the Government to draw up a plan of action to address late payment issues that they claim are decimating small firms’ cash flow.
The group, which includes the Institute of Chartered Accountants in England and Wales, the Food and Beverage Industry Suppliers Association and the Forum of Private Business have written to Business Minister Mark Prisk calling for a number of measures, including:
- Confirming that the EU Late Payment Directive making 30-day payment terms mandatory, in the absence of any specified/agreed payment terms, is being brought forward to 2012 as originally stated and ensure any new legislation prevents suppliers being coerced into agreeing to vary payment terms against their will;
- A clamp down on large companies taking ‘prompt payment discounts’ and imposing retrospective changes to payment terms and conditions that are not contractually agreed;
- Pledge to continue with the UK’s public sector 10-day and 5-day payment initiatives, and ensure they are embraced by more local public sector bodies across the country;
- Strengthen the Prompt Payment Code, including requesting businesses to sign up to the Code – exploring ways of making it an ‘opt out’ rather than an ‘opt in’ arrangement – and calling for examples of where it has been breached;
- Require FTSE companies to report more detailed information on their payment times.
The latest data from credit reference agency Graydon UK shows that 76 per cent of those asked do not believe that the Government is doing enough to protect UK businesses against late payment.
The news comes at a time when late payment to small businesses has hit an all-time high, according to payment body Bacs.
Commenting, chief executive of the Forum of Private Business (FBP) Phil Orford said: There is mounting pressure on the Government to crack down on the growing corporate late payment culture, which is already a huge problem for small businesses and is in danger of becoming endemic.
“Late payment and enforced retrospective changes to payment terms and conditions force firms out of business, plain and simple. It is time to tackle the problem once and for all so that prompt payment becomes the norm, unless there are good, justifiable reasons otherwise.
“In addition to the actions we want ministers to take, we recognise there are proactive steps available to business owners, including implementing proper credit management and credit checking procedures, but there is clearly a culture of fear when it comes to naming and shaming large late payers.
“We are also urging anyone subjected to this kind of treatment to tell us about it – we’re not afraid to take these companies on.”