The government has announced a crackdown on late payments to small businesses and
the self-employed.
Late payments cost SMEs £22,000 a year on average, according to Smart Data
Foundry, while the Federation of Small Businesses says it leads to 50,000
business closures a year.
The government will consult on new laws that will hold larger firms to account
and aim to get cash flowing back into businesses.
In addition, new legislation being brought in the coming weeks will require all
large businesses to include payment reporting in their annual reports - putting
the onus on them to provide clarity in their annual reports about how they treat
small firms. This will mean company boards and international investors will be
able to see how firms are operating.
Anna Leach, Chief Economist at the Institute of Directors (IoD), said:
'For small businesses in particular, the time taken to pay an invoice
matters. Companies that are paid swiftly can raise their productivity by
spending more time on projects of economic value and less time chasing
invoices.
'We know from our research that there is a significant lack of awareness
amongst businesses of the ability to check on the payment practices of large
employers, and even fewer feel able to take enforcement action against their
customers.
'By ensuring that there is increased visibility of payment practices,
reputational pressure will spur change in poorly performing firms, rather
than smaller suppliers needing to try and negotiate in isolation.'
Internet link: GOV.UK IoD