Company Directors and Board Members will now be held accountable for slow payment methods to small businesses in an attempt to increase transparency and responsibility for late payments.
New powers will force "Audit Committees" to report poor payment practices in company annual reports. The UK government will consult on tightening the authority of the Small Business Commissioner to hold responsible the small percentage of big businesses who consistently fail to make payments on time to small businesses. Something that SMBs desperately need to maintain a positive cashflow position.
These new measures could include the following:
1. Requesting compulsory information from companies
2. Businesses having to disclose payment terms and processes
3. Imposing financial penalties
4. Forcing the setup of contractural payment plans on large businesses who have unfair payment procedures
The responsibility of the voluntary code of best practice, the Prompt Payment Code will also be moved to the Small Business Commissioner currently administered by the Chartered Institute of Credit Management (CICM) on behalf of the Department for Business, Energy and Industrial Strategy (BEIS). This will improve the means to tackle late payments under one organisational structure and ensuring the Small Business Commissioner has the powers to change the culture of unfair payment practices.
Small businesses are the backbone of the UK economy and it's essential to ensure the UK is the best place to start and grow a business. These new measures will undoubtedly help small businesses with the support they need to get paid quickly and end the unacceptable culture of paying invoices late.
The Small Business Commissioner’s Office was established by the UK government in 2017 to tackle the issue of late payments. To date it has recovered over £3.8 million to combat the closure of 50,000 small businesses a year who suffer as a result from poor credit control practices and late payments.
Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said, “By forcing audit committees of big businesses to report payment practices in company annual reports, there will be no more covering-up by those who treat smaller suppliers shabbily. The FSB has long campaigned for the measures announced and it is very welcome to see them being put into action. We will continue to work with the Small Business Commissioner as he seeks to make full use of his new powers.”
“Ending late payments and poor practices is not only the right and fair thing to do, it will also spare small firms the financial impact of waiting for the money they’re owed, and instead allow them to invest and grow”, the Federation of Small Businesses.
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