Will new government proposals improve the late payment picture?

09/10/2018

The government has committed to creating a more responsible payment culture with a set of new proposals designed to clamp down on late payments. But are these measures enough to deliver practical improvements?

The proposals, which form part of the government’s modern Industrial Strategy designed to create a fair and just business environment, include a call for evidence on how best to create a responsible payment culture.

The consultation will consider the impact of existing measures to improve payment practices as well as whether new measures should be introduced to further encourage a responsible payment culture.

Some of the proposed suggestions include:

making company boards give a non-executive director specific responsibilities for the business’s prompt payment performance
promoting innovative technologies, such as the latest accounting software, to help small firms manage their payments processes
empowering trade bodies to highlight the best and worst practices in payment behaviour

More measures

The consultation launch follows an earlier announcement by the Business Secretary, Greg Clark, where other new measures to support small businesses were outlined, including:

the Small Business Commissioner to join the Prompt Payment Code’s Compliance Board to support his role in tackling late payment
the Board to consider all complaints made about compliance as part of regular reviews, and report on all cases of signatories being removed from the Code
further reform to the Code to be considered, including whether the Small Business Commissioner should have a greater role in its administration

These new proposals are the latest in a long line of measures designed to tackle the problem of late payment.

Previous initiatives included the introduction of the Small Business Commissioner and The Payment Practices Reporting Regulations.

However, there is little evidence to suggest that these measures have had any positive impact on late payment yet.

Setting an example

The government looks set to lead by example by committing to paying 90% of undisputed invoices from SMEs within 5 days and ensuring all government departments have a dedicated non-executive director responsible for prompt payment.

Other ambitions include improving payment practices and exploring how better to use technology to make payment processes more efficient.

Cabinet Office Minister for Implementation, Oliver Dowden, said: “We expect the highest payment standards from both government and big business.

“We are listening to businesses and doing more than ever to level the playing field for small businesses to win work in the public sector.”

But, similar promises have been made and then broken before.

Earlier this year, local authorities were criticised for ignoring their duty to protect the supply chain from late payment and the Federation of Small Businesses (FSB) revealed the shocking poor payment practices in the government’s own supply chains.

With this in mind, can businesses trust that any new commitments will make a difference?

The call for evidence on tackling late payment is open until 29 November 2018.

For details on how to share your views on the issue please visit: https://www.gov.uk/government/consultations/creating-a-responsible-payment-culture-a-call-for-evidence-on-tackling-late-payment.

What do you think? Will the new proposals help to create a more responsible payment culture? Let us know your thoughts in the comments below.