The fight against late payments, particularly where small businesses are concerned, has been a long one and is a struggle that still isn’t over.
HM Revenue & Customs (HMRC) has reported that small businesses are currently owed around £23.4bn in overdue invoices. The cashflow impact of this, particularly during the Coronavirus pandemic, has left the survival of many smaller firms hanging in the balance.
Announced on 1 October, the government has launched a consultation to gather views on extending the powers of the Small Business Commissioner (SBC), to help small businesses claw back some of the income that they have, so far, not seen and to encourage a culture of ‘prompt payment’.
Included in the new proposals, the government suggest giving the SBC power to:
- order companies to pay their partners, either in full or as per the terms of an agreed payment plan, when a complaint against them for late payment has been investigated and upheld, and to issue penalties for non-compliance.
- compel companies to share information during an investigation by the SBC, as a means of promoting better cooperation.
- launch investigations into suspected bad payment practice, without needing to have first received a complaint.
- claim investigation costs from an investigated company when there are adverse findings against them.
It has also suggested giving the SBC power to investigate practices that are unrelated to late payment, but that also negatively affect a small businesses ability to innovate, develop and grow.
Martin Williams, our partner specialising in advising SMEs and start-ups, comments: “As advisers to hundreds of small businesses and start-ups, we know that working capital is always tight when setting up in business and the impact of customers then paying outside of agreed terms can be serious.
“During the Coronavirus pandemic with finances already impacted for a lot of businesses, it is unfortunate that poor payment practices have, in some cases, led to businesses being left with no other choice but to close doors.
“Small businesses that are desperate to innovate and grow, are being deprived of the opportunity to do so when they are either waiting for money to come in or spending all their time chasing outstanding invoices.
“We are pleased to hear that the Government has launched a consultation, with the intention of giving more power to the Small Business Commissioner. Hopefully, the results will lead to faster resolve for businesses in many more instances.”
The consultation will run until 24 December 2020 and those who have been affected by this issue are invited to take part in the consultation here.
How can George Hay help?
We have many years of experience working with SME’s, across a range of industry sectors, and we understand the impact that an inconsistent stream of income can have on these businesses.
We can help you to take control of your cashflow and drive your business forward. We will work diligently with you, to put a realistic plan together that will cultivate confidence within your business and ultimately facilitate growth.
We also support a range of online accounting and bookkeeping software packages, including Xero, Sage and Kashflow, meaning we can easily take care of your cloud accounting needs.
If you’re concerned about late payment or you’re interested in streamlining some of your processes to improve productivity, contact us today.