With the UK’s smaller businesses currently owed £14.2 billion in late payments, we are regularly being assured the government takes the matter seriously and continues to look for ways to tackle the ongoing issue.
In recent years, a number of new initiatives have been introduced by the government with this in mind.
This includes the appointment of the Small Business Commissioner, the introduction of payment reporting regulations and now plans to ban late payers from bidding on government contracts.
All of these ideas are certainly welcome news for smaller businesses, who are desperate to find a solution to the late payment problem which Bacs Payment Schemes reports is costing them more than £2 billion a year.
But can we trust these promises to tackle late payment when the government is in fact a top offender in paying small businesses late and fails to follow their own rules?
A Freedom of Information request obtained by two specialist contracting trade bodies – the Electrical Contractors Association and Building Engineering Services Association – revealed that local councils are ignoring their duty to protect the supply chain.
Public Contracts Regulations 2015 state that 30-day payment down the supply chain is mandatory, and that public bodies should take steps to ensure this takes place.
But, this is simply not happening.
According to the data obtained from 195 councils, almost nine in 10 local authorities are not monitoring whether supply chains are being paid within 30 days.
Almost half (49%) said they did not have, or did not know if they had, a contractual requirement to pay in this timeframe, while one in five (18%) said they had no intention of including this in future contracts.
This echoes research from the Federation of Small Businesses earlier this year which revealed that nine out of ten (89%) public sector suppliers have been paid late.
This is true both for suppliers to central government (88%), local government (91%) and those supplying public infrastructure projects (91%).
Many trade bodies have responded to this disappointing performance by calling it unacceptable.
And it’s perhaps not surprising that some are finding it hard to trust that promises to improve transparency and late payment will be kept when the government is failing to follow their own rules and setting a bad payment record of its own.
No amount of pledges to tackle late payment will be enough unless the government starts to lead by example and show that poor payment will not be tolerated by anyone.
Until that happens the onus is on small businesses to protect themselves by implementing a strong credit control policy and utilising all the tools available to encourage prompt payment and ensure that their cash flow is protected.
Alex Hilton-Baird, Managing Director, Hilton-Baird Collection Services