Home Business News The government has published its prompt payment and cash flow review

The government has published its prompt payment and cash flow review

by LLB Finance Reporter
24th Nov 23 7:45 am

The UK government has published its prompt payment & cash flow review, calling for stronger reporting obligations for businesses designed to reduce late payments and support small businesses.

The review will see action taken to extend reporting on payment practices, broaden the powers of the small business commissioner, increase active and visible enforcement or payment reporting and excluding suppliers with poor payment times.

Ivalua and Quadient AR, Ivalua also conducted research into late payments and they found that 52% of organisations have had to pay suppliers later compared to 12 months ago amidst higher costs and market uncertainty, whilst the average delay was 22 days, but 21% had paid suppliers a month later or more.

Stephen Carter, Director of Payments Strategy at Ivalua said, “The government’s proposed changes will provide much-needed support for suppliers, but this is just one step to addressing a larger issue.

“Late payments cost UK businesses £27 billion a year, stalling cash flow and stifling innovation. Organisations must take ownership of this problem and proactively address late payments. Paying suppliers late can lead to production delays, supply disruptions and damaged relationships.

“In extreme cases, late payments can put suppliers out of business – the Federation of Small Businesses claims 50,000 UK business closures could be avoided each year if they were paid on time.

“By paying late an organisation breaks the bond of trust that is critical in any relationship. The focus should be on paying at the right time for both parties. This could be early payment to strengthen the supply chain or on a key milestone to reduce risk. Paying late is a symptom of an organisation having no control over their critical spend cycle.”

Anthony Venus, Chief strategy and Product Officer at Quadient AR by Yaypay said, “Ultimately, the Prompt Payment Code is about addressing the lopsided balance of power that can exist between businesses.

“In light of this review, it’s good to see the Government putting some of its own weight on the scales by excluding suppliers with poor payment times from bidding for large contracts. Increased visibility, education and collaboration are all good signs, but ultimately legislation needs both the carrot and the stick to succeed.

“It’s now up to businesses to follow the code and improve their payment processes. If they can’t, further action might be needed.

“Whether that’s the stick of legislating overdue fees into all contracts, or the carrot of tax incentives on automation innovations on top of emphasising the benefits of digital invoicing to speed up the entire payments cycle. Time will tell how successful the new code is, but ideally it will drive a sea change for SMEs.”

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