Government announces new actions on tackling late payment for small businesses

The government has announced new measures aimed by tackling the problem of late payment faced by small businesses.

Following its Prompt Payment and Cash Flow Review, which Enterprise Nation responded to, the Department for Business and Trade said the soon to be released final report will include the following actions:

• The Reporting on Payment Practices and Performance Regulations 2017, which require large business to publish their payment data, will be extended. The government said it will include new metrics for reporting, including a value metric, so businesses and commentators can see the value of invoices, including invoices paid late, and a disputed invoices metric. It will also introduce reporting on retention payments for businesses in the construction sector.

• The government said greater advice will be provided to small businesses on negotiating payment terms that better suit them, and on how going digital can help them get paid quicker and manage their cash flow.

• The powers of the Small Business Commissioner will be broadened including enabling her to undertake investigations and publish reports where necessary on the basis of anonymous information. The Commissioner, a role created by the government to help small businesses deal with overdue invoices, cannot currently investigate anonymous reports. Small businesses are often fearful of putting their name to complaints due to worries over losing the client. The change to the Commissioner's powers will require primary legislation.

• The Prompt Payment Code, a voluntary code through which big firms commit to paying on time, will be strengthened so that business signatories must reaffirm their commitment every two years to stay on it.

It is estimated that £23.4bn is currently owed in outstanding invoices to UK businesses, while data from the Enterprise Nation Small Business Barometer showed a third of small firms were paid late in the third quarter of last year.

Enterprise Nation has made several calls on the government to tackle late payment. One of our asks was to make it easier for the Small Business Commissioner to investigate poor payment practice, a suggestion the government has positively responded to.

Business and trade secretary Kemi Badenoch said:

"SMEs make up 99% of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that.

"The measures we're announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.which will include guides on negotiating payment terms."

Emma Jones, Enterprise Nation founder and CEO, said:

"Enterprise Nation’s research found nearly half (47%) of small firms are either often or sometimes paid late, placing an enormous strain on their cash flow, stunting growth and impacting their ability to operate and pay suppliers. Sometimes, it can even lead good and viable firms to collapse.

"That is why ensuring businesses get paid on time for what they do is crucial, and today’s announcement by the government will be welcomed by small businesses across the country.

"Enterprise Nation have long-called for the government to make it easier for the Small Business Commissioner to hold late-payers to account, and small businesses will be looking forward to the publication of the government’s Prompt Payment and Cash Flow Review to see the detail.

"Ultimately, reducing the time spent by small businesses chasing payments will free up more time for them to focus on the activities they need to grow."

Relevant resources for dealing with late payment

• Webinar: Small business commissioner discusses how to get paid on time

• Webinar: How to get paid on time in challenging economic times

• Podcast: How to deal with late payment

• Blog: Nine ways to manage your debtors and deal with late payment

• Advisers: Book a free advice call with a finance expert