Government to crack down on late payment culture

06 March, 2015

• Good cash-flow is vital in enabling businesses to continue to raise finance and invest when required and late payment has a major negative impact on businesses ability to access finance. According to Professor Russel Griggs, the independent external review of the major banks’ Appeals Process, in 2012/2013 48 per cent of declined finance applications over £25,000 were rejected on ‘affordability’ grounds – the ability of an SME to service the debt from its existing cash-flow.

As we go into 2015 the Government is introducing measures to encourage prompt payment by obliging bigger companies to publicly report their payment performance. These measures formed an important part of the Small Business Enterprise and Employment Bill and government has said that it will consult with industry on the best way to address it. BFPA is at the heart of those consultations and is encouraging a ‘name and shame’ policy. Conversations with members reveal a great deal of support for what we are doing.

The details of exactly how these measures will be implemented is still under discussion and great care is being taken not to undo all the good work that has been done to reduce the regulatory and administrative burden on UK companies at all levels – but the current culture has to change. The current view is that if the large tier one companies can be encouraged to improve their performance through a mixture of ‘carrot and stick’ regulation, the improvement will ‘ripple-down’ the supply chain and improve performance at all levels.

As Vince Cable, Secretary of State for Business Innovation & Skills stated; “Some of the options [being] explored are quite radical, and I make no apology for that – the importance of the issue demands it!”

www.bfpa.co.uk