Susan Love

This move is part of the forthcoming Prompt Payment & Cash Flow Review aimed at reinforcing and better executing current policies to ensure timely payments for small businesses.

In 2022, SMEs faced outstanding late payments averaging £22,000. By fostering a healthier payment culture, the UK economy could see an uplift of £2.5 billion annually.

The main concerns for SMEs include lengthy payment terms and delayed invoice settlements, leading them to expend significant time pursuing these payments. The resultant cash flow issues have seen even profitable firms grappling with their finances.

Key measures from the upcoming review feature:

Expanding the 2017 Reporting on Payment Practices and Performance Regulations: The government plans to legislate extended payment performance reporting obligations. This will encompass novel reporting metrics, including the value of invoices (both timely and late) and those disputed. Additionally, it will mandate reporting on retention payments in the construction sector.

Advocacy for SMEs: SMEs will receive enhanced advice on negotiating payment terms that are more advantageous for them. Moreover, the potential benefits of digitisation, such as swifter payments and cash flow management, will be highlighted.

Enhancing the Small Business Commissioner’s Role: The commissioner’s powers will be broadened, permitting investigations based on anonymous data and intelligence. However, this expansion will need primary legislation and will adhere to legislative timings.

By championing a robust payment culture, the UK government aims to provide businesses with more consistent cash flow. This will reduce administrative hours spent chasing payments, enabling SMEs to focus on expansion and enhancing economic productivity and investment.

Secretary of state for business and trade Kemi Badenoch said: “SMEs make up 99% of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that.

“The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.”

ACCA Scotland welcomed the UK government’s strategy. Susan Love, ACCA Scotland’s strategic engagement lead, highlighted ACCA research that underscored the financial challenges and late payment impacts on cash flow for SMEs, both in the UK and Scotland.

She said: “In our response to the government’s consultation earlier this year we underlined the key role the Small Business Commissioner plays as an external champion shining a light on unfair treatment of SMEs.

“We called for the Office of the Small Business Commissioner to be strengthened, so we warmly welcome plans for additional powers.”

She continued: “Strengthening the regulatory regime, including payment performance obligations, is a key piece of the late payment puzzle, enabling better transparency on the performance of suppliers.

“However additional action, such as continued education, will be required until new legislation can be put in place.

“Accountants in Scotland – as key advisors to small business – as well as professional bodies like ACCA Scotland, have an important role to play in sharing our experience and expertise but a collective effort is now required to change the UK’s late payment culture.”