The Federation of Small Businesses estimates that about 50,000 companies a year close as a consequence of big businesses delaying payments to them, with listed companies often the worst culprits.
Late business payments
The question of late business payments has been discussed for a number of years, and The Late Payment of Commercial Debts Act 1998 was introduced to help address the problem twenty years ago, but it still persists.
The issue came under the spotlight recently when Carillion collapsed last year. It had become a notorious slow payer and when it went bust it left tens of thousands of suppliers owed a total of £2 billion when it failed.
A similar picture emerged when another outsourcing company, Interserve, recently went into administration.
In the past, the Government has promised to take definitive action to tackle the scourge of late business payments for small organisations. Philip Hammond stated in his Spring Statement that companies may be required to publish details of the length of time a company takes to pay its invoices in their annual accounts. However, he has not given any details.
The plans for boardroom responsibility for payment performance are due to be set out by the business secretary Fred Clark, and the Federation for Small Businesses believes that poor payment practices if published, may cause companies and boards to change their behaviour.
Comment
A solution to this problem cannot come soon enough for small businesses, which are in great need of support. It can only be hoped that this time an end to the problem of late business payments might be in sight.
Currently, the best way of tackling late payments is to consider tighter credit control procedures and, if necessary, start chasing debts earlier. This can be done constructively if there is a fear that it might threaten business relationships. However, it is always worth asking whether it is worth preserving a business relationship which is putting a strain on your own business?
How Nelsons can help
It is vital to take steps to collect debts early, and at Nelsons we have found that early intervention can bring results for clients and need not threaten future trading if handled correctly. Nelsons has been collecting debts for clients for over 30 years, helping clients to reduce the late payment problem.
Please contact a member of our Dispute Resolution team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form for further information.