Election sheds light on each Parties plans to combat Late Payment

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small business late payment costing SMEs £1.6bn

With tomorrow’s election looming, promises have been made by Politicians on how they each plan to combat late payment.

All the major political parties are making pledges to tackle late payments that hurt business growth in the UK. The Conservatives, Labour and Liberal Democrats have all made promises to tackle the late payments crisis harming businesses.

Labour says it would stamp out the late payment of invoices via new legislation to force large businesses to reveal their payment practices.

The Conservatives would improve enforcement of the prompt payment code, a voluntary code of practice for businesses, designed to encourage supplier payment in 30 to 60 days.

The Liberal Democrats would require all government agencies, contractors and companies with more than 250 employees to sign up to the prompt payment code, making it enforceable.

Ruby Hartery, senior underwriter and insolvency expert at Atradius UK, said “Nearly two-thirds of all B2B sales are transacted on credit in the UK, and Atradius data shows late payments currently affect 40% of B2B sales across all business sectors.

The UK consumer durables industry is hardest hit, with payments being collected on average two weeks past the due date, causing cashflow imbalances.”

“The impact of late and long payments on companies can’t be overstated, contributing to an estimated 50,000 UK business closures each year. The anxiety they cause also takes a huge toll on business owners’ mental health.

“Naming and shaming late-paying businesses, as Labour has proposed, would put pressure on them to pay their invoices on time. We haven’t yet got details on how this would work, or whether it would be accompanied by strict enforcement and penalties for companies that don’t comply.

“Even with these proposed measures, which would be a step in the right direction, we wouldn’t expect an immediate end to the late payment’s crisis.”

What has been done previously to combat late payment?

Recent Governments have tried different initiatives to combat late payment with little success.  In 2015, the UK Government launched a voluntary Prompt Payment Code, which encouraged businesses to commit to paying invoices within 60 days. However, this code has faced criticism for lacking enforcement measures and not being mandatory.

Other measures such as the Small Business Commissioner role, introduced in 2017, have also been deemed ineffective due to its limited powers and lack of resources. As a result, late payment remains a significant issue for many small businesses in the UK.

One possible solution that has been suggested is implementing stricter regulations and penalties for companies that consistently fail to pay their invoices on time. This could involve imposing fines or even revoking business licenses for repeat offenders. The introduction of a mandatory prompt payment code with enforced consequences may also be necessary to effectively address the problem.

In addition, there have been calls for more transparency in payment practices, with some experts suggesting that companies should be required to publicly disclose their payment terms and track their payment performance. This could not only hold companies accountable for their actions but also serve as a useful tool for small businesses when choosing who to do business with.

Another potential solution is the use of technology to streamline invoicing and payment processes. Many businesses still rely on manual methods such as paper invoices and checks, which can lead to delays and errors. By adopting digital solutions like electronic invoicing and automated payments, companies can improve efficiency and reduce the risk of late payments.

However, while these measures may help alleviate the issue of late payment, ultimately it comes down to a cultural shift in how businesses view and prioritize timely payments. This can be achieved through education and awareness campaigns, as well as stricter regulations and penalties for companies that consistently fail to pay their suppliers on time.

Additionally, there needs to be a change in attitude towards small businesses. Often, large corporations have the upper hand when it comes to negotiating payment terms with smaller suppliers. This power dynamic can lead to late payments being seen as a normal part of doing business. But by recognizing the importance of timely payments for smaller companies, it can help level the playing field and create a more equitable environment.

In conclusion, late payment is a pervasive issue that affects businesses of all sizes. However, by implementing solutions such as improved transparency, technology adoption, and cultural changes in attitudes.

Combating Late payment – Business Debt Collection

One constant over the years in the battle against business late payment has been business debt collection solutions.

Chris Spencer of leading Business Debt Collection specialists Federal Management said “In our 20 year history, Federal Management has assisted thousands of businesses and recovered hundreds of millions of pounds”

“We hope which ever party comes into power will help tackle the problem, certainly in the cases of Large companies not paying their smaller counterparts”

“Every day we receive calls from Small Businesses struggling with Business late payment and I’m pleased to advise we are able to help most of them”

“If a Business is struggling with cash flow issues due to late payment, it is imperative they tackle action”

 

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