New Measures To Ensure Small Businesses Get Paid On Time
For start-ups and small businesses, cash flow can be a real issue. Whilst larger corporations may be able to cope with delayed payments and long invoice periods, this can affect business functions in smaller organisations.
With some small businesses being forced to close due to consistent late payments and cash flow issues, the government has proposed new measures to help ensure that small businesses get paid on time.
If successful, these measures could revolutionise the business landscapes for SMEs, start-ups and entrepreneurs, and enable them to compete with larger firms on a more level playing field.
What Are The New Measures?
Small Business Minister, Kelly Tolhurst, has announced a variety of new measures which could be used to help protect small businesses. Perhaps most importantly, larger firms could face fines and sanctions if they fail to pay small businesses on time. With an added incentive to ensure invoices are processed in a timely manner, this could greatly reduce the number of delayed payments.
If the Small Business Commissioner is granted new powers, they would be able to issue fines to businesses that fail to make payments on time, and they could even enforce payment plans to ensure small businesses aren’t floundering due to cash flow issues.
Furthermore, the new measures could mean that Boards of Directors are held responsible for payment practices within their supply chain. An innovative way to tackle the issues affecting small businesses, holding a Board accountable for their payment practices will be another strong incentive for larger companies to overhaul their current payment processes.
Whilst the Prompt Payment Code is applicable, under new measures it will move to the remit of the Small Business Commissioner, giving them increased powers to tackle the issue. In addition to this, companies that are failing to adhere to the requirements of the Payment Practices Reporting Duty could face further fines and even prosecution.
How Will The Measures Affect Small Businesses?
It’s highly likely that the majority of small businesses will welcome the proposed changes, as they will be more far-reaching than the existing voluntary code and mandatory practices. As a result, they’re likely to be far more effective in ensuring small businesses and start-ups are paid on time.
However, the proposed changes will include a new fund to help smaller businesses simplify their accounting. With the aim of increasing the use of technology to aid payroll, accounting, invoicing and credit management, small businesses will have the opportunity to streamline and simplify their own accounting processes.
As many sole traders, start-ups and SMEs are already switching to more tech-savvy accounting options, further funding to increase automation is likely to be welcomed across the board.
Whilst the number of delayed payments to SMEs has dropped considerably, to almost half over the last five years, there are still a significant number of small businesses suffering because of poor payment practices.
If enacted, the new measures will enable the Small Business Commissioner to take a tougher approach towards larger companies who are flouting the existing rules and will ensure small businesses aren’t harmed due to late payments, poor practices and sporadic cash-flows.
If you are a small business owner and looking for help and advice in switching your accounting processes, get in touch with us today and we can talk you through the options. Call 01753 840 188 or email firstname.lastname@example.org.