Government vows to act on SME late payments

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government to combat sme late payments

The UK government has launched tougher measures to tackle SME late payments to small businesses as part of its upcoming Prompt Payment & Cash Flow Review.

The Prompt Payment & Cash Flow Review is a scrutiny of current payment practices, measures and progress in combating SME late payments issues to help the government assess the right support is in place to support small businesses.

SME late payments

In 2022, SMEs were owed on average an estimated £22,000 in late payments. The government says that improving payment culture in the UK will support smaller businesses – many of which do not have the resources to accommodate long or sme late payments from their business customers – and could boost the economy by £2.5bn annually.

The new measures in the review will include:

  • Extending the Reporting on Payment Practices and Performance Regulations 2017. Following consultation, the government will take forward legislation to extend payment performance reporting obligations. This will include new metrics for reporting, including a value metric – so businesses and commentators can see the value of invoices – and includes invoices paid late and a disputed invoices metric;
  • Providing greater advice to small businesses on negotiating payment terms that better suit them, and on how going digital can help them get paid quicker and manage their cash flow; and
  • Broadening the powers of the small business commissioner by introducing broader responsibilities, enabling the commissioner to undertake investigations and publish reports where necessary on the basis of anonymous information and intelligence.

The government hopes the measures will reduce the time spent by businesses chasing payments and, instead, free up time for other activities that could help them to grow – providing an opportunity to increase investment and productivity across the economy, it says.

SMEs are the lifeblood of the UK’s economy

“SMEs make up 99% of firms in the UK and are the lifeblood of our economy,” says Kemi Badenoch, secretary of state for business and trade.

“I know that late payments are a massive barrier to growth and I am determined to fix that. The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.”

2023 research by Intuit QuickBooks found that one in six invoices (17%) issued by SMEs were overdue. 52% of SMEs believe that the issues have worsened recently and that their businesses have also been adversely affected by late payments.

The most commonly used excuse for sme late payments is forgetfulness (23%) and cash flow issues of suppliers (20%).

A helpful guide to small business debt collection can add value to any SME.

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