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February 14, 2018
A north east business finance expert is backing new Government plans to tackle the growing problem of companies failing to pay their suppliers on time.
Stephen Slater, Director of Commercial Services at Gosforth-based RMT Accountants & Business Advisors, was speaking after Business Secretary Vince Cable announced that plans to introduce fines for firms that fail to pay invoices on time were under consideration.
Modelled on a scheme currently used in Sweden, the penalties system is one of a number of different options being considered by the Government to help reduce the estimated £30bn in outstanding payments that is owed to UK small businesses.
Recent research by the Forum of Private Business found that 35% of the SMEs said they had seen a reduction in profits as a result of late payment or bad debts, while 16% reported a noticeable reduction in turnover
A voluntary Prompt Payment Code was introduced last year to provide advice and guidance to both suppliers and purchasers, but fewer than half of Britain’s biggest companies, who are viewed as being characteristically more likely to pay their bills late, have so far signed up to it.
Other proposals under review include initiatives targeted at specific sectors such as construction, where the issue of late payment is believed to be particularly prevalent.
Stephen Slater says: “Cash flow is clearly crucial for companies of any size, especially in an economic climate where cash is very much king, but for hundreds of small firms across the region, getting invoices paid on time can mean the difference between staying in business or going under.
“Even if late payments are causing them major problems, SME owner/managers can often be reluctant to act to avoid any risk of damaging their relationships with their clients, especially if their business depends to a great degree on the continued support of one or two larger customers.
“With so much emphasis being placed on small businesses’ role in driving the UK’s continuing economic recovery, the Government is acting now to stop late payments becoming an unnecessary and unwanted brake on the whole process.
“In an era where payments can be made instantly over the internet, and where companies have systems in place which make their operations unbelievable efficient, there’s no valid excuse for supplier invoices not being paid on time – the days of ‘the cheque’s in the post’ should be long gone.
“There are a number of steps that SME owner/managers can take to help solve their late payment problems, and rather than just wait and hope, we would very much recommend that they take proactive steps to resolve such problems before an inconvenience becomes a major issue for the business.”
RMT provides the full range of financial and business advisory services through its Specialist Tax, Recovery & Insolvency, Corporate Finance and Medical divisions. For more information, please visit www.r-m-t.co.uk