Government urged to rewrite the rulebook on late payment
The government is being urged to throw out the rulebook relating to late payments and start afresh if it really wants to tackle the problem that bedevils so many small businesses.
The Association of Chartered Certified Accountants (ACCA) has conducted a widespread study into the issue and produced a report, Ending Late Payment. It says the crucial step needed to deal with the problem is to build a financial structure that would boost trade credit, particularly for small businesses.
ACCA spokesman Andrew Leck said: “Late payment is life-threatening for many organisations in the UK, and its impact on the smallest businesses is most acute. Those with fewer than 50 employees are typically twice as likely as large corporates to report problems with late payment.”
ACCA’s report identified nine conditions that would have to be met to make trade credit sustainable. These included making terms of credit more transparent for both buyers and suppliers, and providing clear credit policies and contract terms to make cash flow more predictable.
The report also urged suppliers to be more aware of the risks involved when providing credit. Invoices should be monitored closely, with senior staff taking responsibility for collection and administration.
Mr Leck said: “When late payment becomes a chronic problem, supply chains are beyond repair and customer relationships fail. Opening the doors to trade credit for the UK’s businesses is a solution that could put a stop to late payment before it has even started.”
Please contact Thomas Nolan if you would like more information about the issues raised in this article or any aspect of debt collection and credit control.