Credit, Collections & Insolvency News
David Thomson, CEO of Close Brothers Invoice Finance, said SMEs needed better protection from government and regulators. “The UK’s record on late payments is very poor – while other countries have seen late payment rates come down as their economic fortunes have improved, the UK’s business culture seems to be one in which it is acceptable not to pay SMEs on time,” he said. “SMEs often lack the power to hold large organisations to account and need greater support from government to help them do so.”
Close Brothers’ research mirrors other assessments of the UK’s late payments problem. A series of reports and surveys in recent months have highlighted the issue, with organisations such as the Asset Based Finance Association warning the problem is escalating in some industries, stifling growth and even leading to business failure.
SMEs are eagerly awaiting details of the Government proposal to set up a Small Business Commissioner, which could be given powers to intervene in disputes between SMEs and larger organisations over payments. However, it remains unclear exactly how the scheme will work and to what extent large businesses will be required to participate; the Prompt Payments Code, for example, is a voluntary standard.
“SMEs need better statutory protection and an independent champion prepared to take action on their behalf,” David Thomson added. “Many SMEs feel very uncomfortable challenging larger businesses, on which they may be reliant for substantial amounts of revenue, over late payments; this is where regulatory action is essential. It’s crucial that SMEs try to grip this issue themselves,” he said. “You need to be crystal clear about your payment terms at every stage of your dealings with customers – and to chase invoices the moment they become due; consider credit checks on new customers and don’t accept poor practices from your existing customers.”