Tuesday, 21 March 2017 09:25

Scottish Government Shows Good and Bad Side on Late Payments

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The Scottish government has been forced into an embarrassing admission after it was revealed that it fails to pay a fifth of invoices on time. After the late payments figures were made public by the Scottish Labour party, the ruling SNP’s Finance Secretary Derek MacKay had to confirm they were correct during a Parliamentary session at Holyrood.

The numbers relate to all public sectors invoices processed through the Scottish Government’s financial systems, and show that one in five undisputed invoices result in late payment.

This is a major embarrassment for the SNP after it took well publicised steps to clamp down on late payments in Scottish industry.

Its Business Pledge scheme, a voluntary initiative to encourage Scottish businesses to sign up to a wide ranging set of ethical practices, includes a pledge on prompt payment.

The Scottish government has also acted to tackle late payments down the supply chain in public sector contracts. In October 2016 it introduced so called Project Bank Accounts (PBAs) to manage the distribution of funds between contractors and subcontractors.

The idea of PBAs is to prevent the larger firms which win major public tenders subsequently delaying payments to their smaller subcontractors. Instead of going straight to the main contractor, money is held in a PBA from where it is distributed to all parties within a guaranteed timeframe.

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Public Sector Contracts - Risk vs Reward

Its failure to settle a fifth of its undisputed invoices on time certainly does not shed the Scottish government in the most positive of lights, and will draw accusations of hypocrisy. It also underlines the issues facing firms working on public sector contracts the world over.

On the other hand, the Scottish government must be credited for introducing PBAs, which is a positive step. It is something the UK government has also looked at, but nothing has come of it yet. In the meantime, nearly a quarter of all insolvencies in the UK are attributed to late payments.

Not many governments worldwide are taking steps like those in Scotland to tackle late payments, especially in the public sector. Public contracts tend to be high value as governments and state bodies invest in infrastructure or put parts of their own enormous operations out to tender. There is plenty of money to go round for big fish and small, and overseas work subcontracting on public projects attracts many British firms in the construction, engineering, digital technology and professional services industries.

Chasing Debt Overseas

But what happens when payments do not arrive on time? Whether it is the public bodies themselves or the main contractors responsible, international debt collection can seem an insurmountable challenge. Without the protection of schemes like PBAs and in a foreign jurisdiction, chasing overdue payments can seem like a lost cause.

The best advice for handling late payments, whether at home or abroad, is to contact a debt collection specialist. Safe Collections has a network of partners all over the globe, providing access to professional debt collection expertise on the ground. With knowledge of local laws and regulations, and understanding of how the public sector in that country works, they are best placed to recover debts quickly and efficiently.

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Image Scottish Parliament by Yun is licensed under CC BY 2.0