Late payment has been an issue for small businesses for a long time, and it is one of the campaign issues for the Forum of Private business when it was formed in 1977 and it still remains high on our agenda to this day.
The Forum feels that the margins being made by many small businesses have reduced in recent years, driven by the living wage, currency fluctuations, pension provision, late payment, large customers driving down margins, less financial support in terms of short-term small loans particularly from the banks and tough competition.
This means that many small businesses no longer have a big enough cash shock absorber to deal with business issues that cause cash flow problems, this, in turn, can lead to business failure.
There are some suggestions that we feel need to be taken on if we are going address this issue:
- Make 30-day payment terms a legal requirement, consumers have to meet the 30-day requirement on credit cards or utilities so unless the agreed contract states otherwise 30 days should be the norm.
- Give the Small Business Commissioner the resources to research payment issues and create a trusted annual payment survey, that suppliers will engage with so he can target his support to those late payers who need it.
- Give the Small Business Commissioner the power to penalise persistent late payers.
- Provide better training and education for small business on invoicing and payment issues, so they get their processes and procedures up to standard.
- Allow all invoices to be reassigned to allow for the use of invoice finance while preventing companies offering fast payment terms to suppliers which are in effect bank loans that may need repaying as in the Carillion case.
- Remove retainers from the construction industry or at least ensure they are paid in full.