From September, some of the largest Government contractors could be barred from public sector contracts if they do not pay small businesses on time.
It’s a practice known as “subbie bashing” and we’ve written before about how detrimental it can be to small businesses.
It is thought that Small and Medium-sized Enterprises (SMEs) across the UK are owed more than £50 billion in late payments.
And now, outsourcers who do not pay 95% of small business subcontractors within 90 days could be frozen out of public sector procurement. However, the rule would only apply to those contracts worth more than £5m in the £50bn Government procurement sector.
According to data collected by the business department, many outsourcers have fallen below the 95% threshold over the last 6 months.
Recently, the Government announced that they were giving the Small Business Commissioner new powers to fine those that pay small businesses late. However, some people think this isn’t enough.
Many small businesses feel powerless because they don’t have the resources to fight back against the larger contractors; and many feel trapped in a cycle, as they rely on these contracts and the business they promise in the future.
Mike Cherry, chairman of The Federation of Small Business, has said that there is no excuse for large contractors to withhold payments when they are paid within five days from the Government.
Late payments can cause serious cash flow issues for SMEs. We’ve worked with many companies who have run into trouble due to cash flow issues. Our team of professionals share a wealth of experience in tackling cash flow concerns and helping businesses find a solution.
Contact Clarke Bell for your (free) advice.
