Late payment solutions must come from the business community, not from government

By Anthony Persse, Director of Strategy.

The issue of late payments remains one of the biggest challenges faced by UK SMEs. So much so, that it was a key issue dominating the party manifestos during the recent general election. 

Promises of legislation to ‘stamp out’ late payments received a lot of media airtime, and the Twittersphere was abuzz. What was great was that it put a spotlight on a problem that needs urgent attention. But, is this an issue that the government should be creating laws to fix? The problem with laws are that they are rules, which can be inflexible and given that late payments isn’t a one-size fits all problem, a single set of rules won’t really work.

Just take a look at our recent research into the impact of late payments on SMEs. Typically, late payments are considered to be a small or micro business challenge, but actually we have found that medium-sized companies, with more than 50 employees, are struggling more than their smaller counterparts. In fact, 94% of ‘MEs’ (medium-sized businesses) are negatively affected by late payments, compared to an overall of 81% across the entire SME sector.

My personal feeling is that tackling such a huge business challenge should only fall to the business community. Divisive legislation such as late payments reporting is damaging to that community, creating an ‘us and them’ situation which is not conducive to reaching a long-term workable solution.

Steps that have already been taken, such as the prompt payment code which aims to tackle the issue are a great starter for 10. But, when you look at recent figures from the Federation of Small Businesses (FSB) which shows that late payments are still killing 50,000 small firms a year it’s pretty clear there is a significant way to go.

This is not just a case of the bigger boys picking on the smaller guys. Cashflow and supply chain management affects every organisation, and should be tackled by the community coming together to support one another.

As our research shows, companies of all sizes have their own cashflow issues and I think it’s time for the business community to unite and find its own solution. An initiative or code, for example, that supports businesses holistically and recognises the individual needs of different companies, could work well.

Both SMEs and corporates understand the challenges better than anyone. They should be the ones to create the solution, with support from government and the wider industry – not the other way around.

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