New proposals have been outlined by government to ensure small businesses in the UK are paid on time, Small Business Minister Paul Scully today announced (1 October).

Currently £23.4 billion worth of late invoices are owed to small firms across Britain, impacting on businesses’ cash flow and ultimate survival.

Today’s proposals, as part of a new consultation launched today, look to give new powers to the Small Business Commissioner including:

• The power to order companies to pay their partners, either as a lump sum or agreed payment plan, when a complaint against them for late payment has been investigated and upheld. Companies which do not do so could face further penalties, including fines. This will give a clear incentive for companies to pay their partners on time.
• The power to compel companies to share information during an investigation by the SBC. This will ensure cooperation with SBC investigations and provide more information about company payment practices.
• The power to launch investigations into suspected bad payment practice, without the need to have first received a complaint from a small business.
• Expanding the scope for complaints to the SBC, to allow the Commissioner to investigate complaints about other businesses relating to payment matters in connection with the supply of goods and services.
• To review and report on wider business practices outside of payment matters, on instruction of the BEIS Secretary of State. This could be a practices unrelated to payment matters specifically impacting small businesses such as supply problems, or broader issues like barriers to the adoption of payment technology.
• The power to claim investigation costs from an investigated company when there are adverse findings against them.

The Government is seeking to create a culture of prompt payment in UK business. This is essential to enable small businesses to succeed, creating jobs, driving innovation and supporting their community.

Karen Woolven, owner of Karen Woolven flowers in Greenwich, London, said: “There is more than enough to worry about when running a small business without having to spend hours chasing up invoices for services that have already been delivered. I have experienced late payment multiple times in the recent past and it’s a huge problem which causes a lot of unnecessary uncertainty and stress.

“The Small Business Commissioner really helped us to resolve a dispute over this and it makes a lot of sense to give them more powers to sort these issues out. I’m glad to see some action to help small businesses like mine, especially at a challenging time like this.”

Jo Mullett, Director of Knotweed Control, a specialist gardening firm based in South Wales, said: “Having terms, conditions and procedures in place generally means I get paid in on time. However occasionally, things go horribly wrong and for a small company like mine, a lot of time and emotional energy is wasted chasing your tail.

“Every excuse under the sun is used to delay or ignore payment: ‘You don’t have an order number or the incorrect order number’, ‘the person who can authorise this isn’t in this year’, ‘the cheque is in the post’ or ‘we haven’t received your invoice.’

“In one such case I was at the end of my tether, not sleeping and worried sick but determined to get the money I had worked hard for, and I came across the Small Business Commissioner’s website.

“They helped me get the money owed to me just as the company declared bankruptcy. I would never have seen my money if I hadn’t had this help even though the law was apparently on my side.”

David Nichols, UK Chief Claims Officer at Zurich said: “These are testing times for businesses and now more than ever, meeting payment terms on time is imperative for their survival. We fully support the expansion of the commissioner’s powers which will not only help raise awareness of the challenges this creates for businesses, it will also serve to find a resolve far quicker.”

National Chairman of the Federation of Small Businesses (FSB) Mike Cherry said: “We know that paying small businesses late is debilitating, and the practice has increased during COVID-19. It deprives small firms of cashflow, holds back growth, undermines productivity and forces many to take out external finance. In thousands of cases a year this causes the closure of small businesses. It is therefore more important than ever to wipe out this poor payment scourge. The proposed new powers would give the Small Business Commissioner some teeth to investigate bad practice more easily and punish it more severely, and it is very welcome to see these plans being put forward for consultation.”

According to the Federation of Small Businesses (FSB), around 50,000 small companies close each year due to late payments.

With many UK businesses continuing to struggle with the impact of coronavirus, this is now an especially urgent issue.

The Office of the Small Business Commissioner was established in 2017 by the previous government to address the issue of late payments. Since then, the SBC has claimed £7.5 million owed to small businesses and publicly named 8 companies for poor payment practice.

The consultation opens today and will run until 24 December 2020. Businesses are invited to share their views here.

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