Payment and Cash Flow Review Consultation
Government estimates show that more than £23.4billion is currently owed to UK Businesses in unpaid invoices, a level which has prompted the launch of the most recent consultation around late payments. The consultation will look at the steps that could be enforced on large businesses who delay payments to their smaller suppliers.
Whilst a recent review suggested there had been some improvement since the creation of the Office of the Small Business Commissioner in 2016, both the Federation of Small Businesses (FSB) and the latest Xero Small Business Insight Report suggest otherwise.
The FSB has announced that as many as 400,000 businesses could close this year as a direct result of late payments, and the Xero report showed the average small businesses waiting 30.4 days to be paid in November 2022, up by half a day on the previous month.
At a time when businesses are under pressure due to the faltering economy, high inflation and the cost of living crisis, they’re unable to cope with any increase in payment periods. At best this can cause delays in growth plans, but for some businesses it may well be their death knell, as they simply don’t operate with the level of reserves a larger business may have.
Existing commercial debt repayment laws contain a sunset clause that expires in April 2024, when existing protection for small businesses may also be hit. This has added to the realisation that more action needs to be taken, which may include an in-depth review of the Prompt Payment Code.
How to provide your input
The Consultation is open now, and will continue until the 28th April 2023. We’d strongly recommend business owners to take some time to provide their input if possible, given most will have experienced the impact of non-payment or delayed payment within their business.
We have certainly been on the wrong end of late payments over the years, most particularly being left with a debt of £19,000 back in 2004 when we allowed a client to build up a large work in progress bill, who subsequently was unable to pay. It’s a lesson we learnt the hard way, and the reason why we talk so often about having clear debt chase processes and making sure they happen!
Will tech be the answer?
One line within the Consultation suggests that Government feels that tech may have a lot to contribute!
The outline of the Review includes the following: ‘Also within the scope of the review is the role of technology-enabled accountancy platforms in tackling late payments and promoting a better understanding of prompt payment measures within the small business community.’
There’s no explanation of the meaning or intent of the line. We know there is huge power in the use of some of the bolt-on apps available, and of course online bookkeeping systems, but how they could be utilised to resolve such a widespread practice is as yet unknown. We’ll keep a close eye on the outcomes of the Review once they’re announced later in the year and let you know more as soon as we do.
In the meantime, if you have concerns around receiving payments or your cashflow, please do get in touch. There are also resources across the site which may be helpful, primarily in the Cash Flow and Forecasts area of the Info Centre.
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