The government has just announced a range of measure to help small businesses get paid on time. The news couldn’t be more welcome for the millions of small business owners around the UK. When you consider that last year the combined annual turnover of SMEs was £2.0 trillion, it only seems fair that their contribution to the economy should be acknowledged and safeguarded.
The new measures mean that for the first time, large businesses could be fined for not paying their smaller suppliers or could have to sign up for binding payment plans to settle their dues. Another first is that company boards will be held to account over payment practices.
Meanwhile a new fund will support businesses to use technology to simplify invoicing, payment and credit management, and companies who do not comply with their Payment Practices Reporting Duty may be prosecuted and fined.
Speaking about the changes, Small Business Minister Kelly Tolhurst said, “Small businesses are the backbone of our economy and through our modern Industrial Strategy we want to ensure the UK is the best place to start and grow a business. These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly – ending the unacceptable culture of late payment”.
This is great news, and obviously will be encouraging to anyone thinking of setting up a business or perhaps who has previously struggled with late payments.
In fact, it’s estimated that on any one day, the total amount owed to small businesses is £24,871. This inevitably results in cash flow problems, and a business’ ability to pay salaries, rent and other outgoings, as well as stifling their ability to reinvest.
Clearly this has a knock-on effect on the wider economy too, given that there are 5.6 million small businesses in the UK who account for around 50 per cent of GDP.
This latest raft of measures complements the work the office of the Small Business Commissioner has already done since its inception in 2017 to champion prompt payment and claw back debts for small businesses.
If you are starting a business, it’s good to know that you have this back-up. There are also a number of steps you can take to help you get paid in a timely manner. Be clear about your payment terms on your invoices, and make sure you get them out on time.
There’s lots of software out there that can help you track your invoices, and if they flag up a late payment, don’t be shy about sending a polite but firm reminder to chase it up.
It’s good to know that support is out there for small businesses. It should make entrepreneurs more confident about their day-to-day work, as well as their future plans, and represents a very welcome step in the right direction.