Last week saw the introduction of a new Private Members’ Bill to address the issue of late payments, following the failure of the Aldous Bill last year.
The driving force behind the Bill, Lord Mendelsohn, commented:
“Late payment is crippling small businesses while the UK economy is crying out for investment. By failing to tackle late payment we are starving our small businesses of the capacity to act. This Bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”
Research shows that 23% of insolvencies are caused by late payments. If a business is fortunate enough to have the reserves and resources to survive whilst experiencing delayed payments, undoubtedly, that same business will experience cash flow pressure.
Delayed payments to UK businesses have a huge knock-on effect, some examples cited by our clients include; delayed capital investment or expenditure which impacts growth, inability to pay debts which in turn causes pressure on a supplier and will likely lead to costs and interest being incurred and finally, the genuine threat of insolvency.
Whilst bad debt is always a risk, late payment can be just as frustrating. The time and resource expended in chasing payment also comes at a cost, not just financially but also the opportunity cost. In November 2019, Intuit QuickBooks reported that SME’s spent “56.4 million hours a year” chasing late payment.
The changes proposed by the draft bill include:
- A 30-day statutory payment limit for all invoices
- A ban on charging fees in exchange for inclusion on preferred supplier lists or prompt payment
- Fines and penalties for non-payment, specifically targeted at repeat offenders to be overseen by the Small Business Commissioner
Director of My Debt Recovery, Sean Husband, commented:
“This is a promising start to the year and legislation to protect SME’s is always welcomed. We will be keeping a close eye on the activity surrounding this proposed Bill and hope for a positive outcome.”