Many
small businesses are still having difficulties caused by late payments for
goods and services supplied to other organisations. If this is a problem for
you, you may, like many other small business owners, be reluctant to charge the
interest and compensation that is legally allowable by the Late Payment of
Commercial Debts (Interest) Act 1998. This is understandable because you need
to maintain relationships and get more business.
According
to Simon McVicker, director of policy and public affairs at the Association of
Independent Professionals and the Self Employed (IPSE), late payment to small
businesses “jeopardises financial security and damages reputations”.
Recognising the severity of the ongoing problem, IPSE has recently launched a
report with their proposals for solving it.
The Voluntary Code
is Ineffective
Some
of it will seem very familiar to your outsourced
bookkeepers. With them, you probably recognise the argument that the Prompt
Payment Code is not currently effective, and it needs a much stronger
commitment from both the public and private sectors. For example, why is it not
mandatory to have signed up if you are a supplier to the government or a local
authority, or are trying to become one? Those at the end of the line supplying them
are so often the ones who have to wait the longest for their remuneration.
Making
Late Payment Illegal
Other
aspects of the IPSE report are more radical. Some large organisations will only
take you on as a supplier on their own terms, which may be 60 or even 90 days
as standard, regardless of the terms and conditions normal to your business.
IPSE would like to see this outlawed. Current legal sanctions have little
power, so it proposes that no payment terms should be longer than 30 days, and
that it should be illegal to pay more than 30 days late.
Not
only that, but another proposal is to have an automatic fine applied if a
payment remains due when it is 60 days late. This could be up to 10% of the
total cost of the contract.
IPSE
also proposes a Small Business Conciliatory Service to help resolve disputes
out of court, providing free advice, or formal mediation services for an
economical price. Your outsourced
bookkeepers are not the only ones to recognise that small businesses
desperately need help when they are up against major enterprises with so much more
in financial and human resources.
If
you agree with these proposals, you should add your voice to that of IPSE
whenever any lobbying opportunities come your way.
