The UK government has embarked on a comprehensive review into how issues around late payments for small businesses can be remediated.
Acknowledging the severe knock-on effects felt by small businesses as a result of late payments, Business Secretary Grant Shapps will be spearheading ‘The Payment and Cash Flow’ review over the coming months.
Cash Flow Issues for British Businesses
Late payments are likely to cause issues for businesses of all sizes; however, the impact of financial delays is felt most acutely for micro and small businesses in the UK.
This highly ingrained systemic issue typically leads small business owners to spend considerable time and resources chasing late payments from fellow businesses they supply.
Small businesses rely on timely payments, due to the fact that they do not typically have significant cash reserves to absorb payment delays.
Often this leads to cash flow issues. Not only does this stymy efforts to grow a business, but also places significant operating risk on business owners.
Minister for Small Business, Kevin Hollinrake, empathised with the travails of business owners, commenting that he knew the “joy and freedoms of owning and running your own business, but also know what it’s like to lay awake at night and worry about paying the bills”.
The Payment and Cash Flow Review
The Business Secretary’s review will look into existing payment practices and scrutinise current measures in place designed to ensure that small businesses are not taken advantage of by their larger clients.
This will include a comprehensive examination of payment reporting regulations and the Prompt Payment Code.
Business sectors that have processes in place – which have proven successful in tackling the issue of late payments – will be of particular interest to the review.
“The UK’s 5.5 million small businesses are an integral part not just of our economy, but of our communities too, and this government is firmly on their side” Shapps declared.
Highlighting the impact felt by small businesses, resulting from late payments, the Business Secretary acknowledged that it “presents a real barrier to productivity, the creation of high-skilled jobs and ultimately economic growth.”
Shapps was clear that the “review will allow us to build on the success we have had so far in curbing late payment, unshackling small businesses from this exploitative practice and creating a system that is fit for the future.”
It is estimated that over £23.4 billion is currently owed in outstanding invoices to UK businesses.
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