Government struggle with ten-day pledge

Managing your Cashflow

The Government’s recent pledge to pay small firms within ten days rather than the usual 30 will be an ‘uphill struggle’, according to credit control experts.

Managing your Cashflow

The move was announced by the Government last month in an attempt to ease cashflow problems faced by small businesses in the current financial crisis, and was supposed to take immediate effect within central government departments.

But a poll of 238 businesses carried out by commercial credit agency Graydon UK has revealed that just 34% consider the government to be a prompt payer, and 66% described current payment practices as slow or average, with payment taking over 30 days.

According to Graydon UK managing director Martin Williams, the Government will struggle to fulfil its pledge.

“While Gordon Brown’s promise reflects his appreciation of the importance of cashflow to the survival of small businesses in these challenging times, practicalities may inhibit his ability to deliver,”

“There are a number of initiatives the Government could implement in the short term to improve small firms’ cashflow, such as delaying VAT payments for six months or even reducing employer national insurance contributions,” added Williams.

However, a Federation of Small Businesses (FSB) spokesman said that the Government’s ten–day pledge was already working for a large number of its members.

“From what we’ve seen, the Government spends around £66 billion with small businesses, and £58 billion of that is paid within ten days.”

“Within central government departments, the system appears to be working well, but we would like to see this extended to the wider public sector, including local authorities and NHS Trusts, so that firms dealing with these departments can also benefit from prompt payment,” added the spokesman.

According to the Department for Business, Enterprise and Regulatory Reform (BERR), plans to roll out the ten day payment term to other government bodies are already being developed. A BERR spokesman said:

“Cashflow is one of the top priorities for small businesses facing tough times. That’s why central government is leading the way on prompt payment and work is already underway to achieve this target, including extending it to the wider public sector.”

For more information on managing your finances, read our articles on managing your cashflow and managing your creditors.

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