Measures in the budget to clampdown on late payments have been broadly welcomed by business owners. The Government has promised to extend the Prompt Payment Code, and has even revealed that it’s looking to its own payment terms by asking all central Government departments to report quarterly on their payment practices.
John Allan, national chairman of the Federation of Small Businesses said: “Further action to address poor payment practices announced in today’s Budget sends a clear message that poor practices. . . will no longer be tolerated.”
Extending payment terms
The news of this tougher stance comes on the back of recent reports that some of the UK’s largest businesses have been imposing punitive payments terms on suppliers. The Government reacted by naming and shaming some companies, forcing some U-turns in the practice.
Ministers are pushing for 30-day payment terms to be standard with the new maximum limit set at 60 days. Around 1,700 companies have signed up for the Prompt Payment Code which the Government has been working on with the Institute of Credit Management.
Falling foul of the government call
However, the Government themselves have recently fallen foul to their own calls for good practice when it comes to late payments. A report by the National Audit Office released in January revealed that a third of small businesses were not paid in a timely fashion by ministries.
A spokesman for the Federation of Small Businesses said: “Unfortunately poor payment culture is firmly embedded in the UK and unless we see a marked improvement soon, the FSB is calling for an independent inquiry into addressing the poor payment culture.”
One solution to keeping cashflow positive in the face of a poor payment culture is to utilise invoice financing which helps to provide cashflow for your business by releasing value tied-up in outstanding invoices.
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