The government has announced plans to ban late payers from bidding on government contracts. But, whilst it’s great to see the government finally proposing to clamp down on poor payment practices running through its supply chains, more needs to be done for us to see a real cultural change in late payment.
The proposals, which come in the wake of the collapse of Carillion, are the latest in a long line of government initiatives designed to tackle late payment and level the playing field for smaller businesses
The package of new measures includes plans to exclude suppliers from major government procurements if they cannot demonstrate fair and effective payment practices with their subcontractors and allow subcontractors to have greater access to buying authorities to report poor payment performance.
These proposals are certainly a step in the right direction but for us to see a real cultural change in late payment, all businesses need to follow the same example and take a harder line with those who consistently fail to adhere to fair payment practices.
Arguably, the reason that many of the government’s previous attempts to curb late payment have failed is because many small businesses fail to use them.
Take the introduction of the new small business commissioner as an example.
Paul Uppal was appointed in December 2017 to help small businesses resolve payment disputes and tackle larger businesses unfair payment practices.
But, according to a freedom of information request obtained by The Times, he has received just 42 complaints relating to 14 companies in that time.
A small drop in the ocean given that almost 640,000 SMEs in the UK say they have to wait beyond agreed terms for payments, according to Bacs Payment Schemes Limited.
Likewise, the Late Payment of Commercial Debts (Interest) Act gives businesses the right to charge their customers compensation and statutory interest on any overdue invoices to help cover the debt collection costs involved. But many businesses fail to do so.
Also, new payment reporting regulations require all large businesses to report on their payment practices on a twice-yearly basis.
These reports which are available online for everyone to see, have revealed a number of large businesses that have a consistently poor payment record.
Many of these businesses are also Prompt Payment Code signatories who have clearly failed to honour their commitment to pay suppliers on time. Yet, many businesses continue to trade with them. Whether it’s through lack of knowledge or fear of losing custom, a reluctance to use these tools to their advantage is putting small businesses at risk.
To see a real cultural change in late payment we need to take a united stand against poor payers and start using all the tools available to curb poor payment practices.
Failure to do so will allow these businesses to continue to pay their customers late and impose their own often unfair terms onto customers, which will only exacerbate the problems being caused by late payment.
Alex Hilton-Baird, Managing Director, Hilton-Baird Collection Services