Directors of large companies are to be held accountable for supply chain payment practices for the first time under government proposals to help SMEs get paid on time.
A package of measures unveiled by small business minister Kelly Tolhurst includes proposals for:
-new powers for Small Business Commissioner to tackle late payments through fines and binding payment plans
-company boards to be held accountable for supply chain payment practices for first time
– new fund to encourage businesses to use technology to simplify invoicing, payment and credit management
The measures have been welcomed by the Chartered Institute of Procurement and Supply. Chief executive Malcolm Harrison said: “The current practice of self-regulation of payment terms has failed to make any significant impact. We welcome news that the Government is taking steps to hold big businesses accountable for the SMEs they harm through irresponsible late payments.
“However, late payments are about more than just policy, they are sadly ingrained in the culture of many businesses. The practice of enforcing long payment terms onto smaller suppliers is too often seen as a legitimate business strategy, creating inefficiencies and strain on the vast majority of small businesses right across this country. While these new Government measures may help to ensure that contract terms are met, it is important we do not stop there and continue to drive down lengthy payment terms in supplier contracts to ensure SMEs are able to manage their cash flows, to grow their businesses and remain productive. More change is necessary.
“It is essential that these new measures are not launched and then ignored but are rigorously enforced, with consequences, to help create a responsible payment culture that will benefit all companies and support a healthy economy.”