A new private members bill was launched in the House of Lords on 21st January in order to clamp down on the legislation surrounding late payments. The impact of late payments is felt across many industries, particularly with SMEs (small and medium-sized enterprises), who are left in increasingly precarious situations.
It’s not just individual businesses that are affected by late payments though – the economy as a whole suffers as a result of struggling SMEs. When companies are already suffering from cash flow problems, late payments just exacerbate the issues. Now this latest bill is proposing to make the statutory limit for paying bills, 30 days maximum.
The bill also aims to outlaw unfair payment practices, such as supply chain finance schemes which involve having to pay fees to get paid earlier, and subcontractors having to pay to get on preferential lists of suppliers.
As well as the above, the new bill will look to mandate the use of project bank accounts for public sector works over £500k. When it comes to payment disputes, this mandate will allow smaller construction companies to refer them to the Small Business Commissioner, as opposed to going through adjudication.
Labour peer Lord Mendelsohn, who proposed the bill stated:
“Late payment is crippling small businesses while the UK economy is crying out for investment.
“By failing to tackle late payment we are starving our small businesses of the capacity to act. The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse.
“This Bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”
John Bell, the senior partner at Clarke Bell, said:
“This is welcome news for the owners of the smaller companies which are suffering cash flow problems due to late payments from their big company clients.
For years we have been helping company directors who were victims of the practice of subbie-bashing. Often the only solution for them is to liquidate their company, as the late payments have resulted in their company becoming insolvent.”
Are you suffering from late payments?
If your company is feeling the negative effects from late invoice payments, then Clarke Bell’s insolvency experts are here for you.