A private members bill in the House of Lords has been introduced to offer greater support to small- and medium- enterprises, to protect them from late payments, often by larger organisations.
The bill, proposed by Lord Mendelsohn, would reduce the statutory limit for payment of invoices to 30 days, and give the Small Business Commissioner powers to impose fines on regular late paying companies.
The bill would also outlaw charges for getting onto preferred supplier lists, as well as prompt payment discounts for purchasers. It is estimated that up to 25% of insolvencies occur as a result of the cash flow problems caused by late payment of invoices.
Labour peer, Lord Mendelsohn said:
Late payment is crippling small businesses while the UK economy is crying out for investment. By failing to tackle late payment we are starving our small businesses of the capacity to act. The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse.
“This Bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”
A clamp down on late payments featured in the government’s election manifesto, following the spate of insolvencies that followed outsourcing giant Carillion’s collapse in 2018, which had regularly failed to pay suppliers and contractors on-time.
The bill has been backed by the Association of Accounting Technicians (AAT) who, as reported in Accountancy Daily, believe there is wide support for reform.
YouGov polling suggests three-quarters of MPs back the AAT’s recommendations on late payments, which include making the reduction in statutory payment terms, a penalty regime, and making the Prompt Payment Code compulsory for companies with over 250 staff.