Cable announces plans to tackle late payment
02/06/2014 / Comments 0
Business Secretary Vince Cable has unveiled his plans to tackle late payment following a comprehensive consultation into the issue that has reportedly affected 85% of businesses over the past two years.
Among them are proposals to make it compulsory for large businesses to publish information about their payment practices and to strengthen the largely ineffective Prompt Payment Code, which could involve an online rating system that highlights late paying businesses. Other measures include:
- Tackling contractual barriers that currently prevent some businesses from accessing specialist finance options such as invoice finance and factoring;
- Working with trade bodies and associations to raise awareness of the training opportunities available to smaller businesses to inform their staff of how best to access and manage sources of credit information;
- Requirements for public authorities to accept e-invoices;
- Greater powers for Ministers to investigate complaints raised by the Cabinet Office’s ‘Mystery Shopper’ scheme
However, there will be no introduction of an ‘upper tier’ to the Prompt Payment Code that contains stricter payment practices, nor any statutory limit imposed that determines when a company must pay by. Although European legislation dictates that businesses must offer credit terms that don’t exceed 60 days, it also says that payment can be extended if both parties are in agreement, but Mr Cable said:
“We are persuaded by the limited support the proposal received from respondents and the strength of the arguments advanced against it, notably the extent to which accepted payment practice varies across the economy. We will instead be working with industry bodies and business stakeholders to promote sector-based approaches to the development of advice and codes of best practice.”
The government has also avoided introducing fines to late payers, and decided against naming and shaming late payers publicly – for now, at least.
Managing Director of Hilton-Baird Collection Services, Alex Hilton-Baird, believes that there are no surprises in Mr Cable’s proposals:
“To be brutally honest this is all we could realistically expect from the government. There’s very little that they can actually do to curb the issue – fines would be impossible to enforce and administer and an all-encompassing statutory limit on payment times would be counter-productive for some industries.
“Although there is no silver bullet, the plans to increase the transparency of the payment practices of businesses could have an impact if implemented correctly. However the onus is very much on businesses themselves to ensure their credit control teams are as efficient and effective as possible, implementing the right strategies and performing the necessary checks before credit terms are offered to potential customers.”
We have published a free eBook entitled ‘The Essential Guide to Credit Control’ to help businesses to improve their credit control. Download it here…
For more information about how Hilton-Baird can help with single debt recovery or a fully outsourced credit control facility, call our team on 0800 9774848 or email firstname.lastname@example.org.