The government has said it will crack down on late payments to small businesses, in a bid to stop their larger clients abusing their position in the market.
Small business minister Kelly Tolhurst has proposed new measures, including giving greater powers to trade bodies to highlight best and worst practice, which it is hoped will “deliver practical improvements”.
Tolhurst has asked SMEs to guide government strategy, launching a call for evidence on how current laws help promote good payment practice, and what else needs to be done on the issue.
Companies are also asked to consider how boards can put in place “responsible payment practices” throughout their supply chain, such as giving a non-executive director specific responsibility for prompt payment performance.
Tolhurst said that despite the fact the amount owed to businesses in late payments has halved over the last five years, there was more work to be done.
“Today’s new call for evidence will help us identify the most effective way possible to tackle this issue once and for all and ensure small businesses are on a level playing field with their larger counterparts,” she said.
Earlier in the week, business secretary Greg Clark said he would appoint small business commissioner Paul Uppal to the Prompt Payment Code Compliance Board, which works to enforce timely payment standards.
The board sets standards for payment and best practice and is administered by the Chartered Institute of Credit Management on behalf of the Department for Business, Energy and Industrial Strategy.
The government also said it hoped all its departments would commit to paying 90% of undisputed invoices from SMEs within five days and install a dedicated non-executive director responsible for prompt payment if they had not already done so.
Federation of Small Businesses national chairman Mike Cherry said: “Late payment is the biggest challenge affecting small businesses and it is good to see the government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly.
“The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.
“Involving the small business commissioner Paul Uppal with the code is also right as it shows a more joined-up approach to this difficult issue. Further, it is a positive step that central government will set an example – paying 90% of undisputed invoices from small and medium-sized businesses within five days.”
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