‘Not enough companies take late payments seriously’. That was the message from insolvency and company rescue specialists Forbes Burton following last week’s Spring Statement.
Buried towards the end of Chancellor Philip Hammond’s latest economic statement announcement last week was a detail that was somewhat overshadowed by the concern over Brexit.
Rick Smith, MD at Forbes Burton said: “In his statement to the house, there was some news to take comfort in. Widespread investment, some announcements on technology and an acceptance that Brexit talks should have moved on by now was good to hear, but many may have missed a key piece of news for business.
“Late payments have been a scourge for SMEs for a long time and we’ve seen many affected in the recent past by issues such as the collapse of Carillion. Contractors, labourers and those who perform short-form work often have problems with cash flow due to money owed not arriving in time. Many are often on the precipice thanks to waiting for overdue invoices to be paid.”
Rick explains that the announcement now means larger companies have to report their payment terms, meaning those who routinely stretch out payments beyond their stated terms will have their details laid bare via portals like Companies House.
Rick added: “While this is great news and companies wanting to deal with larger firms can now realistically see cash flow figures, it doesn’t do enough to make much of a difference. While the FSB has been fighting a ‘Fair Pay, Fair Play’ campaign honourably, to tighten regulations and to encourage measures to put paid to this shameful process, it’s a shame that this announcement doesn’t cut deeper.
“Too often we see companies go to the wall due to a large contract going unpaid or being paid too late. This kind of practice is shoddy and it needs to stop.
“Reporting only goes so far. In a similar way, reporting of executives who earn over a certain threshold is mandatory and it appears when checking on a company’s credentials but nothing is restricted as a result. If companies faced penalties for this kind of issue then it would be taken a lot more seriously.”
Rick adds that the FSB has also called for Project Bank Accounts that solve the problem of late payments by acting as holding accounts.
“This kind of security would prove useful for many companies, especially smaller SMEs who struggle regularly with issues such as this.”