If you run a small business and have suffered because larger businesses have failed to pay your invoices on time, then maybe 2017 might be the year in which real changes happen. Why so you may wonder? Well, the UK Government has finally announced that new payment measures designed to increase transparency over late payments from big businesses to smaller firms will be introduced next year. The initiative, called the ‘Duty to Report’ is part of a wider government payment transparency initiative.
So what is the ‘Duty to Report’? Well, the thrust of the new policy is that from April 2017, large businesses and Limited Liability Partnerships (LLPs) will be required to submit details on the average time taken to pay supplier invoices twice yearly. When will small businesses be given greater detail on the new measure? Not until the New Year according to Small Business Minister, Margo James. Although the new rules were announced in early December, Ms James has said that the Government will not formerly publish full guidance until then.
Speaking about the new initiative, Ms James said:
“Unfair payment practices and unnecessary red tape hamper [SMEs’] ability to grow and have no place in an economy that works for all.”
“By shining a light on how large businesses pay their smaller suppliers, we want to empower small businesses and drive a real change in payment culture,” she added.
So what is the problem in the government’s view, and why has it felt the need to take action? Well, statistics from the Federation for Small Businesses (FSB) up to the end of June 2015, showed that the combined figure of late payments owed to small and medium-sized enterprises (SMEs) amounted to a staggering £26.8bn, What’s more, the figures also revealed that 30 per cent of all payments to SMEs were made late.
Speaking about the government’s ‘Duty to Report’ initiative, Mike Cherry, National Chairman of the FSB, said:
“Tackling late payments is now a key part of the Government’s corporate governance agenda.”
“The comprehensive and regular Duty to Report is the first step to combat a business culture that feels like one where it is OK to pay small firms late.”
“[However] it is not OK – we estimate that 50,000 business deaths could be avoided every year, if only payments were made promptly – adding £2.5bn to the UK economy.”
The Chartered Institute of Credit Management (CICM) was more fulsome in its praise for the new initiative, with Chief Executive, Philip King, saying it was delighted to see the Small Business Minister “engage with and listen to” organisations like CICM and the FSB in an effort to “drive real change”:
“The new Duty to Report will lead to much greater transparency and is clearly one of a suite of measures to improve payment practices, including the Prompt Payment Code, the appointment of a new Small Business Commissioner, and first and foremost, best-practice credit management,” he added.