A leading freelancers’ organisation says that the Government has backed down over plans to ‘name and shame’ large firms who fail to pay small businesses on time.
Last year, Enterprise minister Matt Hancock said that the Government would consult over whether or not to provide extra measures to protect small firms from late paying clients, and to ensure that the Late Payment Code is expanded and enforced more rigorously.
At the time of the announcement, last December, the Government also said that it will “ensure that from now on all small businesses who supply the public sector in a supply chain will be paid at the same time as we pay our big contractors.”
Although late payment legislation exists to provide some protection for small businesses – including the right to charge interest on overdue invoices, business owners are usually unwilling to take action against larger businesses for fear of losing valuable contracts and trade.
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The leading freelance association in the UK, the PCG, says that the Government has now “backed down” on its pledge to tackle the ongoing problem of late payments.
The organisation’s CEO, Chris Bryce, said that the country’s smallest businesses were particularly vulnerable as a result of being “at the end of the payment chain,” and said that delays “could end up making the difference between success and failure for their business.”
Small firms don’t have the luxury of robust cash flows enjoyed by larger firms, and just a single overdue invoice can cause significant difficulties. Many perfectly viable businesses go under as a result of running out of cash, which remains the single biggest cause of business failure.
Bryce also said that many of the UK’s smallest businesses have no faith in the current late payment legislation:
“In order to change the culture of late payment in business, the code must be compulsory and include some form of sanction for the worst offenders. We are also calling for a system where small businesses can report offenders anonymously, so freelancers are not compelled to jeopardise important client relationships by sticking their heads above the parapet.”
Try our guide to dealing with late payment issues as a useful starting point.