Late payments to SMEs must not be an acceptable way for big businesses to boost their own profits, according to business secretary Vince Cable, who is taking action to improve the transparency of corporate payment practices.
In a recent government consultation, the majority of respondents voted in favour of disclosure as a means of tackling late payments - and the government is now planning to require publication of payment practices by large companies.
The Prompt Payment Code will also be strengthened, with signatories held more accountable for their actions - although it is worth remembering that this is currently still a voluntary initiative.
Any legislative changes will also take time to introduce, as they must pass through Parliament in the usual way, which may incorporate additional consultations, amendments, and other such delays.
Vince Cable said:
"For too long too many large companies have been getting away with not paying their suppliers on time to maximise their profits. It is small business that is suffering as a result and it needs to stop.
"The government has taken action to create a responsible payment culture but we need to go further. We will now make it compulsory for large companies to publish information about their payment practices so that those who are not playing fair can be held to account."
Will It Work?
The simple answer is, no, this is unlikely to have any real effect in terms of eliminating late payments, or accelerating the time taken for big businesses to settle their supplier accounts.
Content continues below
Britain's small to medium-sized enterprises (SMEs) contribute some 99.9% to the private sector - but are facing losses of around £3.7 billion due to poor credit control and debt collection processes.…
Lord Sugar, the artist formerly known as Sir Alan, has made his feelings on late payments very clear - and, like us, he's less than impressed with the government's efforts to tackle the problem. In…
New York publishing house Condé Nast has reportedly come up with a novel solution to the tricky issue of ensuring its contributors get paid on time. As reported here, the magazine empire behind…
Business loans have been making the headlines recently, but it's not all bad news - particularly for companies that have improved debt collection over the past year or so. There's a perception in the…
A voluntary Prompt Payment Code simply does not have real consequences for those who fail to stick to it - even if they have voluntarily signed up to it in the first place.
It's well over six months since we reported on this, and on how big businesses were still able to 'negotiate' (ie coerce) their smaller suppliers into agreeing 60-day or even 90-day payment terms, even after the introduction of the EU Late Payments Directive.
The truth is, all of these initiatives and items of legislation include loopholes allowing payment terms to be renegotiated through mutual consent - and that's the way it should be, but SMEs have to be prepared to stand up for themselves so 'mutual' consent does not simply mean agreeing to whatever the big client demands.
We think it is essential for SMEs to take this stance, not only when negotiating payment terms upfront, but also when it comes to chasing non-payment.
Yes, there is always the fear of upsetting a big customer and losing their business; but a good customer always pays on time. If they don't pay on time, they're not a good customer.
It can be that simple, but you have to be prepared to fight your corner, and making use of the legislation that is put in place to protect you.
Until you are putting the legislation into action to prevent the negative impact of late payment, the government can do all they want; it will not help you unless you are willing to help yourself.
Over 150 Years Of Industry Experience
Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.
Image from flickr user Liberal Democrats is licensed under CC BY 2.0