Will government ever help SMEs by implementing the late payment directive?

pay final notice graphicFollowing many years of  complaints about late payment of bills endangering smaller companies– with the average business owed £31,000 – the Coalition’s Business Secretary MP Vince Cable is to compel companies to publish information about their payment terms.

Last year the subject of late payment was covered on this site, recalling that for many years an engineer neighbour found that the Dutch engineering industry’s system works well: 30% of the full amount due is paid immediately, and then 30% is paid on completion of the job. The final amount is deemed to be the profit and follows later within a stipulated time frame. This does help to avoid the cash-flow problems afflicting those in this country who often have to wait for three months – and more – before any payment is made.

Large companies who have been delaying payment to their suppliers to maximise their profits, might – it is hoped – be ‘shamed’ into changing their behaviour.

pay deloitte graphicBrian Groom of the Financial Times reports that tougher measures such as fining or naming the defaulters could be introduced if the latest plan proves ineffective.

Suppliers have been able to charge interest on late payments since 1998, though few do so because they fear upsetting powerful customers.

The government will work with the Institute of Credit Management to strengthen the voluntary Prompt Payment Code, which more than 1,500 companies have signed.

John Allan, chairman of the Federation of Small Businesses, said: “Whether these measures go far enough without calling for a statutory code will be determined by how big companies change their culture”.

Late Payment Information Campaign

pay on time graphicThe European Commission has organised a two-year campaign in the 28 Member States to end in December 2014.

The aim is to increase awareness amongst European stakeholders, in particular SMEs, and within public authorities on the new rights conferred by Directive 2011/7/EU.

Voluntary regulation has repeatedly failed to influence corporate practice – dare the government offend large companies?


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