Escalate welcomes new BEIS reforms to end poor payment practice, but advises there is still work to be done

New measures were today announced by the Department for Business, Energy and Industrial Strategy (BEIS) to clamp down on poor payment practices, which affect thousands of businesses throughout the UK.

The Government will now consult on strengthening the powers of the Small Business Commissioner, Paul Uppal. These proposed new powers would include imposing financial penalties and binding payment plans, in order to tackle late payments.

Other key proposals from the published report were: 

• Company boards to be held accountable for supply chain payment practices for the first time.
• A tough new approach to large companies who do not comply with the Payment Practices Reporting Duty – which is an existing mandatory requirement on large businesses to report payment practice to a national database twice a year.
• A new Business Basics fund to encourage businesses to use technology to simplify invoicing, payment and credit management.
• Responsibility of the voluntary code of best practice – the Prompt Payment Code – will be moved to the Small Business Commissioner. It’s currently administered by the Chartered Institute of Credit Management on behalf of BEIS, and has more than 2,000 voluntary signatories.

Clamping down on poor payment practices

Chris Clay, Managing Director of Escalate Disputes, commented: “Successfully tackling late payment requires a cultural shift by large businesses, and the Department for Business, Energy and Industrial Strategy’s proposals have the potential to make a difference in this area. Strengthening the scope and power of the Small Business Commissioner and making company boards more accountable for the payment of suppliers will start to change attitudes at leadership level, and that will begin to drive better behaviour over time. 

Although today’s announcement includes some sensible measures to target businesses that refuse to pay on time, they’re unlikely to be enough by themselves. Ensuring that SMEs have quicker and more cost-effective access to the legal system will be vital if the proposals are to have real bite, and accountants and lawyers have an important role to play there.  

Good policy is essential but it also needs to be enforceable and provide a practical mechanism for entrepreneurs to recover the money they are owed.”

The full report from the Department for Business, Energy and Industrial Strategy (BEIS) can be found here.