The government has put forward proposals to end the problem of late payments to small businesses.

Plans unveiled by Small Business minister Kelly Tolhurst include a call for evidence on the best way company boards can put in place responsible payment practices. The government has also committed to pay 90% of undisputed invoices from small and medium sized businesses within five days.

Thousands of businesses affected

Nearly a quarter of UK businesses report that late payments are a threat to their survival. Research from the Federation of Small Businesses suggests that tackling the problem represents a huge opportunity for economic growth. It could add £2.5 billion to the UK economy and keep an extra 50,000 businesses open each year.

Not only do the proposals include a call for evidence, but the government said it will promote innovative technologies. Such technologies include the latest accounting software, to help small firms manage their payments processes. It will also empower trade bodies to highlight the best and worst practices in payment behaviour.

“Our 5.7 million small businesses are the backbone of our economy, and ensuring we remain one of the best places in Europe to start and grow a small business is a key part of our modern Industrial Strategy,” Tolhurst said.

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She added that the amount owed to businesses in late payments has halved in the last five years, but wants to do more.

Levelling the playing field

“[Today’s] new call for evidence will help us identify the most effective way possible to tackle this issue once and for all and ensure small businesses are on a level playing field with their larger counterparts,” Tolhurst explained.

Some large businesses use late payments and extended payment terms to exert control over small businesses in their supply chain. To tackle this, the government will now seek the views of the UK business community on how best to ensure small businesses are given a fair deal.

Call for evidence

“Late payment is the biggest challenge affecting small businesses and it is good to see the government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly,” Federation of Small Businesses national chairman Mike Cherry said.

The call for evidence is open until 29 November 2018. The government encourages businesses, trade associations and other interested parties such as academics to contribute their views to it.

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