Last week, the Small Business, Enterprise and Employment Act 2015 gained royal assent, meaning broadly speaking, the various measures that have already been outlined by BIS, the Insolvency Service and other government departments should be brought into law without any major changes.
What does this mean for creditors? Actually there are some broad sweeping measures, and some more specific ones, which should combine to tip the balance more fairly in the direction of creditors.
In 2009 our founder and Managing Director was interviewed for a piece in The Independent On Sunday, this article is reproduced below with their kind permission. in 2009 we still went by our original name of Creditsafe Ltd, whilst our name may have changed our thirty year commitment to credit management and debt collection excellence has not.
In a frankly astounding turn of events, Debt Guard Solicitors have proposed introducing a right for big businesses to opt out of paying on time.
Read that again, because it's an almost unbelievable statement - a commercial debt recovery firm suggesting that big brands should have the opportunity to simply opt out of being punished for late payment.
Mr Lawrence McGovern, director of Railtrades Ltd (“Railtrades”) has received a 6 year disqualification order for disposing of the company’s assets worth an estimated £52,000 and paying almost that amount to connected third parties.
Mr McGovern’s disqualification from 15 December 2014 follows a disqualification order made in the County Court at Romford on 14 November 2014 by Deputy District Judge Dudderidge. The application on 28 May 2014 was by the Insolvency Service on behalf of the Secretary of State for Business, Innovation and Skills.
We all know healthy cash flow is the life blood of any small business, but when your cash flow is interrupted, survival depends on having funds in reserve - and the same is true of your customers.
So it helps to know how many small businesses out there have savings set aside 'for a rainy day', and how many would be unable to pay you if their own income was interrupted.
The figures don't make for encouraging reading - according to a report from British personal and commercial banking providers Aldermore, fewer than one in three businesses have a savings account at all.
Of those that do, 21% have less than £5,000 saved, and 7% have nothing at all.
Changes to the way companies calculate the VAT on invoices that are subject to Prompt Payment Discounts could effectively rule them out as a way of encouraging clients to pay early.
Until now, businesses have been allowed to calculate VAT based on the discounted invoice price, and display this on their communications with customers.
If the customer fails to pay in time to benefit from the Prompt Payment Discount, the business has been able to charge the full invoice amount, without having to recalculate the VAT.
Where do small businesses turn for help when they suffer due to late payment? Under new government plans, there could soon be a Small Business Conciliation Service tasked with tackling that precise problem.
That's not its official name as yet - and in fact, you could be forgiven for thinking you already know of a 'conciliation service' for small business disputes, in the form of mediation.
Risk is an unavoidable part of business, particularly if you provide credit to your clients - even in the sense of invoicing for work done only once it has been delivered, let alone more complex credit arrangements that involve the lending of money.
The new year is always a good time to take a fresh look at things; for many companies it is the start of a new financial year too, while those whose accounting is aligned with the tax year have the first quarter of the new calendar year to put processes in place.
A fundamental characteristic of late payment legislation so far has been its voluntary nature - nobody forces big businesses to sign up to the Prompt Payment Code, and nobody forces SMEs to charge penalty fees on late payments.
Now one organisation is calling for this to change, with a policy paper that suggests making several aspects of late payment legislation unavoidable for creditors and debtors alike.
It doesn't matter how much you like a bucket; if it won't hold water anymore, it's time to get a new bucket, and that is just what the government needs.
They are now embarking on yet another review of the Prompt Payment Code to try and make it actually work, and their plan to do this is to take advice from organisations like the City of London Corporation, Aviva and Barclays.