GOVERNMENT plans to crack down on late payments to small businesses and the self-employed have been welcomed by the team at JF Hornby & Co.
Late payments cost SMEs £22,000 a year on average, according to Smart Data Foundry, while the Federation of Small Businesses says it leads to 50,000 business closures a year.
But decisive action to tackle the issue is now planned by Whitehall.
Paul Hornby, Managing Director of JF Hornby & Co said: “This is a great move by the government, and we now need to see words turn into action.
Watching brief: Paul Hornby has welcomed the announcement
“Our clients tell us time and again that cashflow is so important to the efficient and healthy running of their business and late payments from companies that should know better – and can do much better – can be very damaging.
“I will be monitoring this matter with interest.”
The government will consult on new laws that will hold larger firms to account and aim to get cash flowing back into businesses.
In addition, new legislation being brought in the coming weeks will require all large businesses to include payment reporting in their annual reports – putting the onus on them to provide clarity in their annual reports about how they treat small firms.
This will mean company boards and international investors will be able to see how firms are operating.
Anna Leach, Chief Economist at the Institute of Directors (IoD), said:
‘For small businesses in particular, the time taken to pay an invoice matters. Companies that are paid swiftly can raise their productivity by spending more time on projects of economic value and less time chasing invoices.
‘We know from our research that there is a significant lack of awareness amongst businesses of the ability to check on the payment practices of large employers, and even fewer feel able to take enforcement action against their customers.
‘By ensuring that there is increased visibility of payment practices, reputational pressure will spur change in poorly performing firms, rather than smaller suppliers needing to try and negotiate in isolation.’
