THE GOVERNMENT has unveiled new reporting guidance for large businesses, to address the £26.3bn owed to small- and medium-sized enterprises (SMEs) in late payments.
The reporting guidance comes as small business minister Margot James announces new regulations in parliament. The rules, effective from April, confirm that large companies and limited liability partnerships will have to publish their payment practices twice a year, including the average time taken to pay supplier invoices.
Read more: 60 per cent of SME invoices are paid late
“The UK is home to a record 5.5 million small businesses and the industrial strategy will help address many of the challenges they face getting finance and scaling up,” said James.
“It’s completely unacceptable that small and medium-sized businesses are owed £26.3bn in late payments, which hampers their ability to grow and has no place in an economy that works for all.”
Late payments are a key challenge for small businesses, preventing them from competing effectively with larger players. There are a number of peer-to-peer lenders offering invoice financing or similar products, such as MarketInvoice and ArchOver, which help SMEs improve their cash flow.
“The new Duty to Report is the centrepiece of the government’s transparency agenda to combat poor payment practice,” said Mike Cherry, national chairman at the Federation of Small Businesses.
“We welcome this as an important tool to change a UK business culture where it is deemed acceptable to pay small firms late. We estimate that if payments were made promptly, 50,000 business deaths could be avoided every year, adding £2.5bn to the UK economy.”