Plans to Impose Levy on Late Payers
Business Secretary Vince Cable has said that previous plans to tackle late payments have failed and that it might be time to impose a levy on late payers…
Vince Cable is said to be considering the prospect of imposing fines on businesses that fail to pay their suppliers on time.
The idea is the latest attempt to get businesses paid on time as SMEs continue to suffer from late payments.
Last year business groups asked the government to intervene on the issue after research highlighted that over half of small businesses admitted that late payment had affected trading.
A quarter of the businesses questioned also said that late payment of invoices was a serious problem and that one late invoice payment could trigger a "domino effect" along the supply chain.
Earlier this year it was reported that as many as a fifth of SMEs were actually turning down business with some firms because they would rather have less business than have to deal with a late payer.
Prompt Payment Code
When new Bank of England governor, Mark Carney, arrived to take over from Sir Mervyn King, in June an open letter from a number of small business interest groups was published.
In the open letter, signed by 14 co-signatories, including is4profit, Mr Carney was asked to do more for small businesses with a request to make the Prompt Payment Code legally binding.
Whether Vince Cable takes this route remains to be seen but the threat of imposing fines on late payers could prove useful to struggling SMEs.
Entrepreneur Beatrice Bartlay, the director of specialist staffing firm 2B Interface, has said that late payers should be hit with a fine. The government itself recommends a maximum payment window of 60 days but Bartlay believes it should be tighter at 30 days.
Bartlay said of the current late payment dilemma:
“Larger companies are crippling SMEs by insisting on unfeasibly long payment terms SMEs are the lifeblood of the UK economy, representing 60 per cent of the workforce and 50 per cent of GDP. Unless something is done to tackle late payment now, our successes in this area will continue to be severely limited and many small and medium businesses will struggle to survive.”
“The first few years for an SME is an extremely tough and telling period, and they’ll only survive on a decent cash flow. Why hinder what is great about Britain with the mass of innovation and bright young start-ups with something as simple as not being paid for what was delivered?”
Credit agency Experian recently published figures suggesting that the issue of late payment was actually worsening with invoices being paid, on average, 24.58 days beyond the terms stated.