Government initiatives
In September, the Government introduced a comprehensive package to combat late payments, a persistent issue that costs small businesses an average of £22,000 annually and leads to 50,000 closures each year.
A new fair payment code will replace the existing prompt payment code, encouraging timely payments to suppliers and rewarding businesses with strong payment practices.
The financial impact of late payments
Late payments pose a significant barrier to growth for small businesses, severely impacting cash flow and leading to delayed wages, unpaid bills, and reliance on loans.
The Government’s measures include mandatory payment reporting for large businesses, requiring them to disclose payment performance in their annual reports.
This transparency will hold larger firms accountable for their payment practices, potentially exposing them to reputational and legal risks if they fail to comply.
Tougher legislation and enforcement
The Government is also consulting on tougher legislation to address poor payment practices, particularly within supply chains.
Research shows that smaller businesses are disproportionately affected by late payments, with delays often increasing further down the supply chain.
Administrative errors, such as mishandling invoices, also contribute to these delays.
Government support for small businesses
By addressing late payments, the Government aims to help 5.5 million small businesses reinvest in their operations, create jobs, and drive economic growth.
This initiative is further supported by tech solutions like e-invoicing, which has been shown to reduce late payments by 20% and processing times by 44%.
Small business owners should familiarise themselves with these reforms to adjust their expectations and understand their legal entitlements.
Strategies for tackling late payments
For guidance on reviewing your existing policies or taking action against late payments, get in touch with our experts. Taking these proactive steps can help mitigate the impact of late payments on your business and promote a healthier cash flow.