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FSB and AAT welcome late payment clampdown for small firms

News of a “robust package” of measures, designed to ensure small businesses get paid on time, have been welcomed by the Federation of Small Businesses (FSB) and the Association of Accounting Technicians (AAT).

The UK’s Small Business Minister, Kelly Tolhurst, confirmed the Government’s intent to clamp down on larger firms that adopt poor payment practices with their smaller contractors and suppliers. These practices have been proven to have a negative effect on the UK economy .

According to recent figures from the AAT, almost a quarter (23%) of small business insolvencies are due to late payment issues.

Furthermore, small firms that are able to absorb overdue invoices are still experiencing stunted growth, damaging productivity and innovation.

Ms Tolhurst revealed the Government’s three-pronged approach towards tackling the scourge of late payments for small firms once and for all.

“Small businesses are the backbone of our economy and through our modern Industrial Strategy we want to ensure the UK is the best place to start and grow a business. These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly – ending the unacceptable culture of late payment,” said Ms Tolhurst.

New powers for the Small Business Commissioner

First and foremost, the Government is consulting on strengthening the powers of the Small Business Commissioner, Paul Uppal. It’s thought those powers will incorporate the disclosure of payment terms and practices, as well as the ability to fine larger firms and commit those with poor payment histories to legally binding payment plans.

The Government has also intimated that the Small Business Commissioner will have full control of the Prompt Payment Code, a code of conduct for best payment practice that’s currently voluntary. However, the Government hopes the Commissioner will be able to foster a long-term culture change in “unfair payment practices”.

Phil Hall, AAT Head of Public Affairs & Public Policy, said: “AAT is naturally pleased that Government has accepted our recommendation to give the Small Business Commissioner powers to impose fines on persistent late payers, which should have a deterrent effect on many late payers. Moving the Prompt Payment Code to become the Small Business Commissioner’s responsibility also makes sense.”

Company boards held to account for their supply chain payment practices

In order to improve the transparency of payment practices among big businesses to their smaller suppliers and contractors, company boards will be forced to create Audit Committees to document payment practices in the public domain via annual reports.

Mike Cherry, National Chairman, FSB, said: “Late payments and poor practices are a scourge which leads to the closure of 50,000 small businesses a year. Today’s measures will for the first time see the culprits brought to account.

“When small firms are paid late, it causes financial hardship and stifles growth. Everyone deserves to be paid on time when they have done the work and provided the goods and services requested.

“By forcing audit committees of big businesses to report payment practices in company annual reports, there will be no more covering-up by those who treat smaller suppliers shabbily.”

Creation of a Business Basics Fund

The Business Basics Fund supports a series of projects designed to find ways to encourage small businesses to adopt technology that simplifies invoicing, payment and credit management. Thus, allowing innovative entrepreneurs to focus more of their time on doing what they do best – running and growing their business.


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