Legislation fails to speed up payments
28 August 2023 – James Salmon
Research by the Chartered Institute of Procurement & Supply (CIPS) shows that rules designed to force large companies to reveal how long they take to pay suppliers have failed to improve payment practices.
Since ‘duty to report’ legislation was introduced in 2017, the average time it takes a large business to pay an invoice has fallen by just one day, to 36 days. The CIPS found that there has only been a “slight improvement” in the number of late payments over the past five years.
Official data shows that 31% of payments were late in 2018. The rate had fallen to 26% by 2022 and remains at that level this year.
Despite the duty to report being a legal requirement, the number of submissions has fallen every year since 2019, with 15,087 submissions in 2019 but only 12,829 last year.
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, has called for Rishi Sunak to intervene, saying the Prime Minister “could have an impact, making membership of his Business Council contingent on signing the prompt payment code, to pay small suppliers within 30 days.”
CPA has long said that the legislation requiring large companies to report on their payment practices would have no effect. CPA has always said the only way to affect change is to hit companies in their pocket.
Turn the late payment of suppliers from a free cashflow boost into the most expensive form of cashflow.
1) Reduce the maximum payment terms from 60 to 30 days.
2) Raise late payment compensation from the levels set decades ago with above inflation increases to values that will truly compensate the victims of late payment and deter future late payments.
3) mandate the payment of compensation and interest on late payments.
Then see how quickly Chief financial officers change the payment practices of their accounts payable departments.
SMEs hit by late payments
Nearly two-thirds of small businesses say late payments from clients are affecting their ability to pay contract workers on time, according to specialist lender Sonovate.
The proportion of SMEs that have problems paying their staff on time had risen from 50% last year, with this stemming from cash flow problems caused by late payments from their customers.
Sonovate’s research also found that 38% of SMEs take more than 90 days to pay their contractors, up from 27% last year.
Almost a third (31%) of SMEs have lost contract workers due to not being able to pay them promptly, while 51% said that they had missed out on talent because of payroll issues.
The Credit Protection Association (CPA) has been assisting thousands of UK businesses who are hit by late payments to get paid, since 1914. CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. And we provide credit information so you can monitor and assess your key customers. Unlike other credit management companies, we offer our members a fixed annual subscription regardless of how high the debt value maybe!
If you are being hit by late payments, just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.
When you see your money come in, you will be so glad you used CPA.