Back in May we investigated the late payment culture in the UK and how it was majorly affecting SME owners cashflow and their businesses as a whole. (Read the article here.)
Kelly Tolhurst, the UK's Minister for Small Business, has announced that the government is actioning plans to tackle the widespread issue of late and slow payments. Wanting to bring an end to the "unacceptable culture" of late payments, claiming that the proposals would "ensure that small businesses are given the support they need."
Part of plans will strengthen Paul Uppal's power as the Small Business Commissioner, giving him the ability to fine businesses that do not pay bills within agreed contractual terms. Additionally, the Commissioner will enforce firms to detail their payment terms and practices as well as payment plans that ensure invoices are settled quickly.
These announcements were welcomed by Mike Cherry, the National Chairman of the Federation of Small Businesses (FSB), and speaking on behalf of his membership he said companies would be "delighted" with the proposals. Aligning with our research, the FSB also estimates that late payment forces about 50,000 businesses to collapse every year. These changes should make a difference.
However the effect of these changes will only be as powerful as Mr. Uppal is in enforcing them, if this policy change remains on paper, and the process is overly bureaucratic and complex, then the effect will be nullified. Phil Hall of the Association of Accounting Technicians believes the Government “could and should” go further, suggesting maximum payment terms could be cut from 60 to 30 days.
Another consideration is the effect this has on supplier relationships, should a smaller firm look to the Small Business Commissioner for support, they may lose favour with a bigger firm they rely on for business. At this stage the news is promising however the effects will have to be monitored and reviewed as to wether stronger enforcement is required.
At GSM we have supported SMEs financially for 22 years, and we welcome this news. For too long we have been called upon as the backstop for this issue. Although, we are more than happy being the backstop aiding SMEs, the undue stress this causes business owners isn't fair. We will wait to see if these new policies have any effect. Regardless, we remain London's leading Asset Finance Broker, helping companies of all sizes across all UK locations get the right finance they need for their ventures. As specialists in the Asset Finance field, we help secure funding for any UK business wether they are looking for a Leasing deal, Hire Purchase deal or simply need a business Loan.
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