Forum suggests raft of measures at Parliamentary session on late payment

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Giving evidence at Tuesday's inquiry, chaired by Labour's Debbie Abrahams, the not-for-profit employer support organisation said over a million SMEs had experienced problems with late and slow payment, and urged MPs to look at new ways to tackle the problem.

Among the proposals suggested by the Forum was for all prime contractors bidding on government contracts to sign the ICM's Prompt Payment Code (PPC); for government to provide legal clarity on how the Forum of Private Business can use a new power (EU Directive on prompt payment) to represent its members on the issue; and for wider adoption of e-invoicing in the public sector.

It also suggested that any public organisation dispensing taxpayers' cash to small business – including the likes of police forces and NHS hospital trusts, should also sign the PPC.

The Forum's Head of Policy, Alexander Jackman, said: "Late payment is having a significant impact on business development, productivity and growth. Research has suggested 35% of small businesses have seen a reduction in profit and 16% have seen a noticeable reduction in turnover as a response to late payment or bad debts.

"Late payments are also having a knock-on effect, leaving many SMEs in a vicious circle of in turn paying their suppliers late. It starts at the top and tends to wash down the entire supply chain. Our own research backs this up, with 77% of businesses who reported being paid late in turn failing to pay their suppliers on time too. In short, it starts with big businesses, and it's down to big businesses to clean up their act and stop it.

"A cultural attitude of late payment has developed in the UK. We need to reverse it quickly before more small businesses go under."

The Forum is also a member of the UK National e-invoicing Forum, a body that promotes the use of e-invoicing. Jackman added: "One way of shoring up payment systems is to adopt an e-invoicing platform to do some of the chasing for you.

"There is some real impetus behind this in government and we urge them to be bold and get the public sector using e-invoicing as a matter of course. The savings are huge so it's a clear win-win."

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During a parliamentary session this week looking at late payment, the Forum of Private Business told a cross-party group of MPs that the issue remains a significant concern for UK SMEs.