Understanding the True Cost of Late Payments for Small Businesses
During my time as Small Business Commissioner, I have made it my mission to meet with founders and entrepreneurs in their own trading environments.
Each month I have travelled with Civil Service policy colleagues to all four corners of the UK, meeting with small businesses and ensuring that their voices are heard by those shaping policy.
My top question for each business is, if government could change one thing to make life easier, what would it be? Of course, there are a wide range of answers, from energy prices, to National Insurance Contributions (NICs), to access to finance, and as you would expect, late payments continue to be a recurring issue.
But as anyone from my office will tell you, late payments cause far more problems than less cash in the back pocket of a small business.
More than financial
Every business needs a strong, healthy cashflow to stay productive, innovative and successful. An unpaid invoice can deduct thousands of pounds and countless hours that could have otherwise been spent growing a business. But late payment is not just financial.
Behind every unpaid invoice is a decision delayed: a hire postponed, an investment shelved, a founder under pressure.
The cost can spread into all areas of running a business. A small business owner may become overwhelmingly stressed, preventing them from growing their business.
Late payments can also cause ripple effects across supply chains, as delay at the top of the chain can impact business owners affording to pay their own suppliers. In some cases, small businesses are treated as interest-free credit with limited support to secure unpaid monies.
Tackling the issue
Here is where the Office of the Small Business Commissioner (OSBC) can help.
The upcoming Late Payments Bill proposes 60-day maximum payment terms with limited exemptions, a mandatory rate of interest (8% above the Bank of England base rate) on all late payments, meaning business customers will no longer be able to owe thousands in late fees to small businesses without repercussions. It will also give further powers of adjudication to the OSBC.
Our newly accredited Fair Payment Code works with larger businesses to showcase the speed of their payments, with now over 700 awardees participating in the Code.
For the last two months, the team have been collecting data on how many businesses in supply chains are impacted by the Fair Payment Code. So far, 44 awardees have informed us that 13,887 businesses within their supply chains have been positively impacted by the Code. The team continually strives to keep driving payment times down throughout supply chains.
If you are a small business owner experiencing symptoms that are not financial, our guidance on accessing mental health support is a useful resource. And if you are struggling with issues of late payment, you can contact our casework team who will do their best to support you.
The post The hidden price of getting paid late appeared first on Elite Business Magazine.
