Unfortunately late payments are a longstanding problem that so many SMEs are all too familiar with, and recent government figures report that an outstanding £23.4 billion is currently owed to UK small businesses.
The government has acknowledged that most small businesses simply don’t have the financial resources to withstand the cash flow issues and other related risks that late payments can cause, especially during the current economic crisis, and so last month Business Secretary Grant Shapps announced a comprehensive review into how small businesses can be better protected against late payments.
The Payment and Cash Flow review
Launched on 3rd December 2022, the Payment and Cash Flow review will evaluate current payment practices and systems, payment reporting regulations and the Prompt Payment Code (PPC) in order to help tackle the issue of late payments and better ensure that larger businesses are not “ripping off” smaller businesses.
As part of the review, digital accountancy software and the role it can play in cracking down on late payments will also be discussed. In addition, the review will look at how banks and lenders can better support small businesses in managing their cash flow and will look to identify potential barriers that small businesses face when accessing finance. The Small Business Commissioner will also undergo a statutory review.
Late payments restrict productivity and economic growth
When announcing the review, Grant Shapps commented:
“The UK’s 5.5 million small businesses are an integral part not just of our economy, but of our communities too, and this government is firmly on their side.
“That many small firms are routinely paid late is intolerable and presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.
“This review will allow us to build on the success we have had so far in curbing late payment, unshackling small businesses from this exploitative practice and creating a system that is fit for the future. While we crack on with this work, I also want to remind big businesses of their duty to ensure their smaller suppliers are paid promptly.”
Hopefully we’ll hear more on this story in the coming months, but for now – why not have your say in the comments section below? You can also find further information regarding the review via the government new story and terms of reference document.
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