UK companies ‘still gripped by poor payments crisis’
The amount of money owed to small businesses has halved in the last five years, according to government ministers – but business leaders say the UK is still gripped by a poor payments crisis.
The figures were released as the government appointed Paul Uppal to the newly created position of Small Business Commissioner. His role will be to “drive a culture change in payment practises to ensure small businesses are treated fairly”. He will help SMEs to resolve payment disputes and to tackle the unfair practices of larger businesses.
Margot James, Small Business Minister, said: “Over the last 5 years the amount owed to smaller businesses has more than halved from £30 billion to £14 billion.
“The Small Business Commissioner service will empower small businesses to take action if they are paid late, potentially delivering a £2.5 billion annual boost to the economy.”
Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: “The UK is gripped by a poor payments crisis, over 30% of payments to small businesses are late and the average value of each payment is £6,142. This not only impacts on the small business and the owner, it is damaging the wider economy.”
The appointment of a Small Business Commissioner is the latest move in a long-term campaign to improve payment practices. This includes the introduction of the Prompt Payment Code (PPC) in which large companies commit to paying small businesses on time.
The government measures are welcome, but many small businesses still struggle with credit control. This can cause cash flow problems that prevent small firms functioning effectively and even put some out of business.
Firms need to ensure they monitor overdue invoices and take early action to ensure prompt payment. A letter from a solicitor is often enough to secure payment, as your customer then realises that you really mean business. If that doesn’t work, there are several more steps that can be taken up to and including court proceedings.
Failure to take early action could lead to cash flow problems and severe financial difficulties.
Please contact Neil O'Callaghan if you would like more information about the issues raised in this article or any aspect of credit control and debt collection.