ICAEW has welcomed the UK government’s announcement for measures to reduce the number of late payments to small businesses. Among the measures announced are recommendations that ICAEW put forward through its representations to government , including increased powers for the Small Business Commissioner (SBC).
It also touches on measures that ICAEW members in small businesses called for at a recent roundtable on the impact of late payments, such as better reporting around payment practices.
The government plans to extend the Reporting on Payment Practices and Performance Regulations 2017, following a consultation. This will mean new metrics for reporting, including value, so that the value of invoices, including invoices paid late, will be incorporated. There will also be a disputed invoices metric. Reporting on retention payments for businesses in the construction sector will also be introduced.
The government will also be “providing greater advice 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.” This will involve work with partners and extending existing initiatives, such as Help to Grow and Growth Hubs.
The Small Business Commissioner will have broader responsibilities that will enable it to undertake investigations and publish reports based on anonymous information and intelligence where necessary. Primary legislation will be introduced at some point in the near future.
With SMEs owed an average £22,000 in late payments in 2022, the government said that improving payment culture in the UK could boost the economy by £2.5bn.
“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,” said Secretary of State for Business and Trade Kemi Badenoch.
Small Business Minister Kevin Hollinrake added: “SMEs that are paid on time can do more business, scale up and make more profits, delivering growth for the economy.”
The announcement will be welcome news for small businesses grappling with late payments in the UK, says ICAEW Head of Business Simon Gray. “Cash flow is critical for small businesses, particularly against a backdrop of ongoing economic challenges, and the new measures announced by the Business and Trade Secretary should improve payment culture and reduce the time wasted chasing debt.
“But there’s still plenty of work to do. As one member of ours put it at a recent roundtable discussion with the Small Business Commissioner, ‘everyone is paying everyone late’. Until legislation is introduced to reinforce payment terms, it’s likely to remain an acute problem for Britain’s small businesses.”
More on late payments
Better Regulation project
The Better Regulation project aims to help ICAEW and its members understand how the UK’s regulatory regime might be improved and to use our insights to call for change.
The most up-to-date thought leadership, insights, technical resources and professional guidance to support ICAEW members working in industry with their professional development.Browse resources
Small and Micro Business Community
Whether you work with small businesses or run your own, practical resources to help at every stage of the business journey.Join the Community
ICAEW Business Advice Service (BAS)
BAS connects entrepreneurs, start-ups, and small and medium-sized businesses with ICAEW regulated accountancy firms who will provide a free initial consultation without obligation.Find out more